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Infection, Acquired Immunity and Externalities in Treatment

  • Toxvaerd, Flavio

This paper considers a model of infectious disease, such as swine flu, in which privately costly treatment confers immunity on recovered individuals. It is shown that under decentralized decision making, infected individuals ignore the externality that their treatment has on susceptible individuals and thus seek treatment only if it is privately optimal to do so. In contrast, a benevolent central planner who does take this externality into account in choosing the level of aggregate treatment, may choose to either eradicate the disease or to retard its eventual dissemination into the population even when individuals would not find it privately optimal to do so. The analysis shows that when immunity from future infection is obtained through recovery, treatment resembles vaccination in its effects on infection dynamics, but important differences remain. Vaccination is shown to more effectively curb infection than does treatment. Last, the inefficiency associated with decentralized decision making can be corrected through subsidized treatment offered on a first-come first-served basis.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 8111.

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Date of creation: Nov 2010
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Handle: RePEc:cpr:ceprdp:8111
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  1. Barrett, Scott & Hoel, Michael, 2007. "Optimal disease eradication," Environment and Development Economics, Cambridge University Press, vol. 12(05), pages 627-652, October.
  2. Toxvaerd, Flavio, 2010. "Recurrent Infection and Externalities in Prevention," CEPR Discussion Papers 8112, C.E.P.R. Discussion Papers.
  3. Boulier Bryan L. & Datta Tejwant S. & Goldfarb Robert S, 2007. "Vaccination Externalities," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 7(1), pages 1-27, May.
  4. Scott Barrett, 2003. "Global Disease Eradication," Journal of the European Economic Association, MIT Press, vol. 1(2-3), pages 591-600, 04/05.
  5. Steven M. Goldman and James Lightwood., 1996. "Cost Optimization in the SIS Model of Infectious Disease with Treatment," Economics Working Papers 96-245, University of California at Berkeley.
  6. Brito, Dagobert L. & Sheshinski, Eytan & Intriligator, Michael D., 1991. "Externalities and compulsary vaccinations," Journal of Public Economics, Elsevier, vol. 45(1), pages 69-90, June.
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