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Lockdowns as options

Author

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  • S.J.G. van Wijnbergen

    (University of Amsterdam)

Abstract

I show that the irreversibility of dying coupled with gradual information acquisition over time on the likely arrival and eventual effectiveness of vaccines confers a real option value to lockdown strategies that delay the incidence of a pandemic.The case for lockdown strategies becomes stronger the more likely vaccine discovery is, and the less uncertainty exists about its effectiveness.

Suggested Citation

  • S.J.G. van Wijnbergen, 2021. "Lockdowns as options," Tinbergen Institute Discussion Papers 21-037/IV, Tinbergen Institute.
  • Handle: RePEc:tin:wpaper:20210037
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    References listed on IDEAS

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    1. Goolsbee, Austan & Syverson, Chad, 2021. "Fear, lockdown, and diversion: Comparing drivers of pandemic economic decline 2020," Journal of Public Economics, Elsevier, vol. 193(C).
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    More about this item

    Keywords

    Pandemic Dynamics; Stochastic Vaccine arrival; information acquisition; irreversibility; lockdowns; real options;
    All these keywords.

    JEL classification:

    • G12 - Financial Economics - - General Financial Markets - - - Asset Pricing; Trading Volume; Bond Interest Rates
    • G13 - Financial Economics - - General Financial Markets - - - Contingent Pricing; Futures Pricing
    • G18 - Financial Economics - - General Financial Markets - - - Government Policy and Regulation

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