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Static and dynamic inefficiencies in an optimizing model of epidemics

Author

Listed:
  • Garibaldi, Pietro
  • Moen, Espen R.
  • Pissarides, Christopher

Abstract

Several externalities arise when agents shield optimally to avoid infection during an epidemic. We classify externalities into static and dynamic and compare the decentralized and optimal solutions when agents derive utility from social interaction. For low infection costs agents shield too little; for high costs they shield too much because of a “rat race to shield”: they delay social action until other agents contract the disease and society reaches herd immunity. Other externalities drive more wedges between the private and social outcomes. The expectation of a fully effective vaccine that ends the disease faster changes results, reversing excessive shielding.

Suggested Citation

  • Garibaldi, Pietro & Moen, Espen R. & Pissarides, Christopher, 2023. "Static and dynamic inefficiencies in an optimizing model of epidemics," LSE Research Online Documents on Economics 120572, London School of Economics and Political Science, LSE Library.
    • Handle: RePEc:ehl:lserod:120572
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    File URL: https://researchonline.lse.ac.uk/id/eprint/120572/
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    Cited by:

    1. is not listed on IDEAS
    2. Martín Gonzalez-Eiras & Dirk Niepelt, 2020. "Optimally Controlling an Epidemic," CESifo Working Paper Series 8770, CESifo.
    3. Gonzalez-Eiras, Martín & Niepelt, Dirk, 2022. "The political economy of early COVID-19 interventions in US states," Journal of Economic Dynamics and Control, Elsevier, vol. 140(C).
    4. Bisin, Alberto & Gottardi, Piero, 2021. "Efficient policy interventions in an epidemic," Journal of Public Economics, Elsevier, vol. 200(C).
    5. Chang Zhai & Ping Chen & Zhuo Jin & David Pitt, 2025. "Optimising pandemic response through vaccination strategies using neural networks," Papers 2511.16932, arXiv.org.
    6. Mart n Gonzales-Eiras, Dirk Niepelt, 2023. "Optimal Epidemic Control," Diskussionsschriften dp2311, Universitaet Bern, Departement Volkswirtschaft.
    7. Peter T. Leeson & Louis Rouanet, 2021. "Externality and COVID‐19," Southern Economic Journal, John Wiley & Sons, vol. 87(4), pages 1107-1118, April.
    8. Raouf Boucekkine & Ted Loch-Temzelides, 2024. "Introduction to the special issue on mathematical economic epidemiology models," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 77(1), pages 1-7, February.
    9. So Kubota, 2021. "The macroeconomics of COVID-19 exit strategy: the case of Japan," The Japanese Economic Review, Springer, vol. 72(4), pages 651-682, October.
    10. Alfaro, Laura & Faia, Ester & Lamersdorf, Nora & Saidi, Farzad, 2024. "Altruism, social interactions, and the course of a pandemic," European Economic Review, Elsevier, vol. 161(C).
    11. Andrew Abel & Stavros Panageas, 2024. "Are Zero-Covid Policies Optimal?," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 53, pages 47-70, July.

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    JEL classification:

    • A12 - General Economics and Teaching - - General Economics - - - Relation of Economics to Other Disciplines
    • D61 - Microeconomics - - Welfare Economics - - - Allocative Efficiency; Cost-Benefit Analysis
    • D62 - Microeconomics - - Welfare Economics - - - Externalities
    • J18 - Labor and Demographic Economics - - Demographic Economics - - - Public Policy
    • I10 - Health, Education, and Welfare - - Health - - - General

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