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On Socializing and Social Distancing in Markets: Implications for Retail Prices, Store-level Consumer Density, and Disease Transmission

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  • Ricardo Lagos

Abstract

I generalize the "noisy search" model of Burdett and Judd (1983) to settings where individual buyers have preferences over the number of other buyers who visit the same seller as them. I consider a version in which buyers have a preference for social distancing derived from the risk of contracting a disease from other buyers, and use it to study the two-way equilibrium interaction between supply-side considerations (such as the distribution of prices posted by sellers) and individual buyers' behavioral responses to the risk of contagion. I find that the price response to the buyers' shift toward social distancing can be an important determinant of the degree to which buyers' individual behavioral responses to the risk of contagion can mitigate the spread of the disease.

Suggested Citation

  • Ricardo Lagos, 2020. "On Socializing and Social Distancing in Markets: Implications for Retail Prices, Store-level Consumer Density, and Disease Transmission," NBER Working Papers 27724, National Bureau of Economic Research, Inc.
    • Handle: RePEc:nbr:nberwo:27724
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    References listed on IDEAS

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    1. Timothy C Reluga, 2010. "Game Theory of Social Distancing in Response to an Epidemic," PLOS Computational Biology, Public Library of Science, vol. 6(5), pages 1-9, May.
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    3. Luiz Brotherhood & Philipp Kircher & Cezar Santos & Michèle Tertilt, 2020. "An Economic Model of the Covid-19 Epidemic: The Importance of Testing and Age-Specific Policies," CESifo Working Paper Series 8316, CESifo.
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    6. Geoffard, Pierre-Yves & Philipson, Tomas, 1996. "Rational Epidemics and Their Public Control," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(3), pages 603-624, August.
    7. Michael Kremer, 1996. "Integrating Behavioral Choice into Epidemiological Models of AIDS," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 111(2), pages 549-573.
    8. Andrew Atkeson, 2020. "What Will be the Economic Impact of COVID-19 in the US? Rough Estimates of Disease Scenarios," Staff Report 595, Federal Reserve Bank of Minneapolis.
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    11. Brotherhood, Luiz & Kircher, Philipp & Santos, Cezar & Tertilt, Michèle, 2020. "An economic model of the Covid-19 epidemic: The importance of testing and age-specific policies," CEPR Discussion Papers 14695, C.E.P.R. Discussion Papers.
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    Cited by:

    1. Michael D. Noel, 2022. "Competitive survival in a devastated industry: Evidence from hotels during COVID‐19," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 31(1), pages 3-24, February.

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    More about this item

    JEL classification:

    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • I12 - Health, Education, and Welfare - - Health - - - Health Behavior

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