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A real option analysis for stochastic disease control and vaccine stockpile policy: An application to H1N1 in Korea

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  • Park, Hojeong

Abstract

Vaccination is mostly used for controlling the diffusion of an infectious disease. This paper attempts to bridge a gap between economic model and epidemiological model to analyze the optimal vaccination strategy when the diffusion of pandemic disease follows a stochastic process. Impulsive vaccination is considered as an effective option to control an infectious disease. A real option model under stochastic Susceptible-Infected-Susceptible (SIS) environment is developed to examine the optimal vaccination threshold when the social costs and benefits of vaccination efforts are considered. A numerical illustration is provided for the case of H1N1 in Korea to show the herd immunity level as a policy rule to suppress epidemic. Policy implications are discussed regarding the vaccine stockpile as a countermeasure to epidemic diffusion.

Suggested Citation

  • Park, Hojeong, 2016. "A real option analysis for stochastic disease control and vaccine stockpile policy: An application to H1N1 in Korea," Economic Modelling, Elsevier, vol. 53(C), pages 187-194.
    • Handle: RePEc:eee:ecmode:v:53:y:2016:i:c:p:187-194
    DOI: 10.1016/j.econmod.2015.12.005
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    References listed on IDEAS

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    More about this item

    Keywords

    Vaccination policy; Real options; Stochastic disease; H1N1;
    All these keywords.

    JEL classification:

    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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