Subsidy Design for Personal Protective Equipments (PPEs) Adoption

Since December 2019, the COVID-19 outbreak has spread in over 100 countries and regions at a stunning pace. To prevent humanitarian health hazards such as COVID-19, people are strongly suggested to purchase and use Personal Protective Equipments (PPEs) for self-protection. However, the fraction of the population who refused to comply with the PPEs is high (and also much higher in some regions than others). In this paper, we focus on an empirically tested behavioral explanation for the compliance obstacle (a lack of self-control) based on the present-bias effect, which means the trend to give a higher valuation to a present reward but a lower valuation to a future reward (O’Donoghue & Rabin, 2006). Since the utility of PPEs is realized in the future, a consumer may postpone his purchase decision but finally abandon his purchase plan in the future period due to this present-bias effect. The key take-away we focus on is that advance selling can be beneficial to the consumers as a commitment device (Bryan et al., 2010). However, the effect of advance selling may be limited, especially for consumers with low valuation, and can only encourage a part of consumers to purchase PPEs. Advance selling alone cannot fully address the compliance obstacles in PPEs.