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Irreversible Decision Making in Contagious Animal Disease Control under Uncertainty: An Illustration Using FMD in Brittany

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  • Mahul, Olivier
  • Gohin, Alexandre

Abstract

The concept of irreversible investment is applied to highly contagious animal disease control when uncertainty about the spread of the disease is resolved over time. In comparison with the strategy of destroying infected herds, the vaccination programme causes additional losses that cannot be recovered. These sunk costs are thus irreversible. Therefore, the gain from waiting for new information, namely the quasi-option value, should induce animal health authorities to delay the decision to vaccinate if the probability of a widespread epidemic is not too high. A numerical example is developed for foot and mouth disease (FMD) in Brittany. Copyright 1999 by Oxford University Press.

Suggested Citation

  • Mahul, Olivier & Gohin, Alexandre, 1999. "Irreversible Decision Making in Contagious Animal Disease Control under Uncertainty: An Illustration Using FMD in Brittany," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 26(1), pages 39-58, March.
    • Handle: RePEc:oup:erevae:v:26:y:1999:i:1:p:39-58
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    Cited by:

    1. Horan, Richard D. & Wolf, Christopher A., 2003. "The Economics Of Managing Wildlife Disease," 2003 Annual meeting, July 27-30, Montreal, Canada 22224, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    2. Benjamin M. Gramig & Richard D. Horan, 2011. "Jointly determined livestock disease dynamics and decentralised economic behaviour," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 55(3), pages 393-410, July.
    3. Kim, Man-keun, 2015. "Supply Driven Input-Output Analysis: Case of 2010-2011 Foot-and-Mouth Disease in Korea," Journal of Rural Development/Nongchon-Gyeongje, Korea Rural Economic Institute, vol. 38(2), pages 1-16, June.
    4. Alexandre Cordier & Jean Gohin & Stephane Krebs & Arnaud Rault, 2013. "Dynamic Impacts of a Catastrophic Production Event: The Foot‐and‐Mouth Disease Case," Risk Analysis, John Wiley & Sons, vol. 33(3), pages 480-492, March.
    5. Benjamin M. Gramig & Richard D. Horan & Christopher A. Wolf, 2008. "Livestock Disease Indemnity Design When Moral Hazard Is Followed by Adverse Selection," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 91(3), pages 627-641.
    6. Arnaud Rault & Stéphane Krebs, 2011. "Catastrophic risk and risk management, what do we know about livestock epidemics? State of the art and prospects," Working Papers SMART 11-05, INRAE UMR SMART.
    7. David A. Hennessy, 2007. "Behavioral Incentives, Equilibrium Endemic Disease, and Health Management Policy for Farmed Animals," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 89(3), pages 698-711.
    8. Andrianos Tsekrekos, 2013. "Irreversible exit decisions under mean-reverting uncertainty," Journal of Economics, Springer, vol. 110(1), pages 5-23, September.
    9. Gramig, Benjamin M. & Horan, Richard D. & Wolf, Christopher A., 2005. "A Model of Incentive Compatibility under Moral Hazard in Livestock Disease Outbreak Response," 2005 Annual meeting, July 24-27, Providence, RI 19200, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    10. Robin N Thompson & Christopher A Gilligan & Nik J Cunniffe, 2018. "Control fast or control smart: When should invading pathogens be controlled?," PLOS Computational Biology, Public Library of Science, vol. 14(2), pages 1-21, February.
    11. Boni, Maciej F. & Galvani, Alison P. & Wickelgren, Abraham L. & Malani, Anup, 2013. "Economic epidemiology of avian influenza on smallholder poultry farms," Theoretical Population Biology, Elsevier, vol. 90(C), pages 135-144.
    12. Mangen, M. -J. J. & Burrell, A. M. & Mourits, M. C. M., 2004. "Epidemiological and economic modelling of classical swine fever: application to the 1997/1998 Dutch epidemic," Agricultural Systems, Elsevier, vol. 81(1), pages 37-54, July.
    13. Rault, Arnaud & Krebs, Stephane, 2014. "Farmers’ willingness to vaccinate against endemic animal diseases: A theoretical approach," 2014 International Congress, August 26-29, 2014, Ljubljana, Slovenia 182780, European Association of Agricultural Economists.
    14. Rault, Arnaud & Krebs, Stephane, 2011. "Livestock epidemics and catastrophic risk management: State of the art and prospects on economic dynamics," 2011 International Congress, August 30-September 2, 2011, Zurich, Switzerland 114793, European Association of Agricultural Economists.
    15. Tong Wang & David A. Hennessy, 2015. "Strategic Interactions Among Private and Public Efforts When Preventing and Stamping Out a Highly Infectious Animal Disease," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 97(2), pages 435-451.
    16. Horan, Richard D. & Wolf, Christopher A. & Fenichel, Eli P. & Mathews, Kenneth H., Jr., 2004. "Controlling Wildlife And Livestock Disease With Endogenous On-Farm Biosecurity," 2004 Annual meeting, August 1-4, Denver, CO 20349, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    17. Fenichel, Eli P. & Horan, Richard D. & Wolf, Christopher A., 2004. "The Role Of Sexual Dimorphism In The Economics Of Wildlife Disease Management," 2004 Annual meeting, August 1-4, Denver, CO 20395, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    18. Turvey, Calum G., 2003. "Conceptual Issues In Livestock Insurance," Research Reports 18171, Rutgers University, Food Policy Institute.
    19. Kobayashi, Mimako & Melkonyan, Tigran A., 2011. "Strategic Incentives in Biosecurity Actions: Theoretical and Empirical Analyses," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 36(2), pages 1-21, July.
    20. Yun, Seong Do & Gramig, Benjamin M., 2014. "Dynamic Optimization of Ecosystem Services: A Comparative Analysis of Non-Spatial and Spatially-Explicit Models," 2014 Annual Meeting, July 27-29, 2014, Minneapolis, Minnesota 170450, Agricultural and Applied Economics Association.
    21. Kohne, Manfred, 2001. "Perspektiven der landwirtschaftlichen Betriebslehre," German Journal of Agricultural Economics, Humboldt-Universitaet zu Berlin, Department for Agricultural Economics, vol. 50(04), pages 1-10.

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