Bai, Miao and Cui, Ying and Kong, Guangwen and Zhang, Zhenhuan, No Panic in Pandemic: The Impact of Individual Choice on Public Health Policy and Vaccine Priority (January 10, 2021). University of Connecticut School of Business Research Paper No. 21-02, Available at SSRN: https://ssrn.com/abstract=3763514 or http://dx.doi.org/10.2139/ssrn.3763514
Problem definition: Public health interventions such as social distancing and lockdown play an important role in containing infectious disease outbreaks such as COVID-19. Yet, these interventions could cause significant financial losses due to the disruption to regular socioeconomic activities. Moreover, an individual’s activity level is influenced not only by public health policies but also by one’s perception of the disease burden of infection. Strategic planning is required to optimize the timing and intensity of these public health interventions by considering individual responses.
Methodology/results: We find that the individual equilibrium activity level is higher than the socially optimal activity level due to an individual’s ignorance of the negative externality imposed on others. As a result, lockdown and social distancing policies may not be the most effective when the disease prevalence is at its peak level. To verify these findings, we conduct numerical studies based on representative COVID-19 data in Minnesota. Moreover, we find that the vaccination priority needs to consider the trade-off between the higher mortality rate of the elderly (less active) group and the higher negative externality imposed by the adult (more active) group.
Managerial implications: Our results call for policymakers’ attention to consider the impact of individuals’ responses in the planning for different pandemic containment measures. Individuals’ responses in the pandemic may significantly affect the optimal implementation of lockdown and social distancing policies and vaccination strategies.