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Contagion management through information disclosure

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  • Hedlund, Jonas
  • Hernandez-Chanto, Allan
  • Oyarzun, Carlos

Abstract

We analyze information disclosure as a policy instrument for contagion management in decentralized environments. A benevolent planner (e.g., the government) tests a fraction of the population to learn the infection rate. Individuals meet randomly and exert vigilance effort. Efforts factor in a passage function to reduce the probability of contagion. We analyze the information disclosure policy that maximizes society's expected welfare. When efforts are substitutes, we provide necessary conditions and sufficient conditions for full disclosure to be optimal. When efforts are complements, equilibrium effort jumps from no-effort to full-effort as a function of contagion exposure risk. Consequently, a disclosure policy pooling intermediate infection rates—which are associated to high exposure risks—is optimal.

Suggested Citation

  • Hedlund, Jonas & Hernandez-Chanto, Allan & Oyarzun, Carlos, 2024. "Contagion management through information disclosure," Journal of Economic Theory, Elsevier, vol. 218(C).
    • Handle: RePEc:eee:jetheo:v:218:y:2024:i:c:s0022053124000437
    DOI: 10.1016/j.jet.2024.105837
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    References listed on IDEAS

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    More about this item

    Keywords

    Contagion; Information design; Full-disclosure; Obfuscation; Strategic substitutes; Strategic complements;
    All these keywords.

    JEL classification:

    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • D47 - Microeconomics - - Market Structure, Pricing, and Design - - - Market Design
    • D81 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Criteria for Decision-Making under Risk and Uncertainty
    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design

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