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Great Expectations: Social Distancing in Anticipation of Pharmaceutical Innovations

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  • Makris, M.
  • Toxvaerd, F.

Abstract

This paper analyzes equilibrium social distancing behavior in a model where pharmaceutical innovations, such as effective vaccines and treatments, are anticipated to arrive in the future. Once such an innovation arrives, costly social distancing can be greatly reduced. We characterize how the anticipation of such innovations influences the pre-innovation path of social distancing. We show that when vaccines are anticipated, equilibrium social distancing is ramped up as the arrival date approaches to increase the probability of reaching the post- innovation phase in the susceptible state. In contrast, under anticipated treatment, equilibrium social distancing is completely phased out by the time of arrival. We compare the equilibrium paths with the socially optimal counterparts and discuss policy implications.

Suggested Citation

  • Makris, M. & Toxvaerd, F., 2020. "Great Expectations: Social Distancing in Anticipation of Pharmaceutical Innovations," Cambridge Working Papers in Economics 2097, Faculty of Economics, University of Cambridge.
    • Handle: RePEc:cam:camdae:2097
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    References listed on IDEAS

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    1. Chryssi Giannitsarou & Stephen Kissler & Flavio Toxvaerd, 2021. "Waning Immunity and the Second Wave: Some Projections for SARS-CoV-2," American Economic Review: Insights, American Economic Association, vol. 3(3), pages 321-338, September.
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    5. Mitman, Kurt & Hanley, Douglas & Bognanni, Mark & Kolliner, Daniel, 2020. "Economics and Epidemics: Evidence from an Estimated Spatial Econ-SIR Model," CEPR Discussion Papers 15310, C.E.P.R. Discussion Papers.
    6. Flavio Toxvaerd, 2019. "Rational Disinhibition And Externalities In Prevention," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 60(4), pages 1737-1755, November.
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    8. Toxvaerd, F. & Rowthorn, R., 2020. "On the Management of Population Immunity," Cambridge Working Papers in Economics 2080, Faculty of Economics, University of Cambridge.
    9. David McAdams, 2020. "Nash SIR: An Economic-Epidemiological Model of Strategic Behavior During a Viral Epidemic," Papers 2006.10109, arXiv.org.
    10. Toxvaerd, F.M.O, 2020. "Equilibrium Social Distancing," Cambridge Working Papers in Economics 2021, Faculty of Economics, University of Cambridge.
    11. Miltiadis Makris, 2020. "Covid and Social Distancing with a Heterogenous Population," Studies in Economics 2002, School of Economics, University of Kent.
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    Cited by:

    1. Timothy Robin Y. Teng & Elvira P. Lara-Tuprio & Joselito T. Sescon & Cymon Kayle Lubangco & Rolly Czar Joseph T. Castillo & Mark Anthony C. Tolentino & Maria Regina Justina E. Estuar & Lenard Paulo V., 2024. "Assessing economic losses with COVID-19 integrated models: a retrospective analysis," Palgrave Communications, Palgrave Macmillan, vol. 11(1), pages 1-14, December.
    2. Romans Pancs, 2024. "A vaccine auction," Review of Economic Design, Springer;Society for Economic Design, vol. 28(4), pages 763-780, December.
    3. Farboodi, Maryam & Jarosch, Gregor & Shimer, Robert, 2021. "Internal and external effects of social distancing in a pandemic," Journal of Economic Theory, Elsevier, vol. 196(C).
    4. Eichenbaum, Martin S. & Rebelo, Sergio & Trabandt, Mathias, 2022. "The macroeconomics of testing and quarantining," Journal of Economic Dynamics and Control, Elsevier, vol. 138(C).
    5. Carnehl, Christoph & Fukuda, Satoshi & Kos, Nenad, 2023. "Epidemics with behavior," Journal of Economic Theory, Elsevier, vol. 207(C).
    6. Auld, M. Christopher & Toxvaerd, Flavio, 2021. "The Great Covid-19 Vaccine Rollout: Behavioural And Policy Responses," National Institute Economic Review, National Institute of Economic and Social Research, vol. 257, pages 14-35, August.
    7. Joshua S. Gans, 2023. "Vaccine Hesitancy, Passports, And The Demand For Vaccination," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 64(2), pages 641-652, May.
    8. Cristina Arellano & Yan Bai & Gabriel Mihalache, 2023. "COVID-19 Vaccination and Financial Frictions," IMF Economic Review, Palgrave Macmillan;International Monetary Fund, vol. 71(1), pages 216-242, March.
    9. Christopher Avery, 2024. "The economics of social distancing and vaccination," Review of Economic Design, Springer;Society for Economic Design, vol. 28(4), pages 781-812, December.
    10. Yasushi Iwamoto, 2021. "Welfare economics of managing an epidemic: an exposition," The Japanese Economic Review, Springer, vol. 72(4), pages 537-579, October.
    11. Christopher Avery, 2021. "A Simple Model of Social Distancing and Vaccination," NBER Working Papers 29463, National Bureau of Economic Research, Inc.
    12. So Kubota, 2021. "The macroeconomics of COVID-19 exit strategy: the case of Japan," The Japanese Economic Review, Springer, vol. 72(4), pages 651-682, October.
    13. McAdams, David & Song, Yangbo & Zou, Dihan, 2023. "Equilibrium social activity during an epidemic," Journal of Economic Theory, Elsevier, vol. 207(C).
    14. Lepetit, Antoine & Fuentes-Albero, Cristina, 2022. "The limited power of monetary policy in a pandemic," European Economic Review, Elsevier, vol. 147(C).
    15. Carbonero, Francesco & Scicchitano, Sergio, 2021. "Labour and technology at the time of Covid-19. Can artificial intelligence mitigate the need for proximity?," GLO Discussion Paper Series 765, Global Labor Organization (GLO).
    16. Datta, Soumya & C. Saratchand, 2021. "On the Macrodynamics of COVID-19 Vaccination," Working Papers 21/352, National Institute of Public Finance and Policy.
    17. Toxvaerd, Flavio & Rowthorn, Robert, 2022. "On the management of population immunity," Journal of Economic Theory, Elsevier, vol. 204(C).
    18. Andersson, Ola & Campos-Mercade, Pol & Meier, Armando N. & Wengström, Erik, 2021. "Anticipation of COVID-19 vaccines reduces willingness to socially distance," Journal of Health Economics, Elsevier, vol. 80(C).
    19. George Kapetanios & Nora Neuteboom & Feiko Ritsema & Alexia Ventouri, 2022. "How did consumers react to the COVID‐19 pandemic over time?," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 84(5), pages 961-993, October.

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    More about this item

    Keywords

    Economic epidemiology; social distancing; pharmaceutical interventions; vaccination; treatment;
    All these keywords.

    JEL classification:

    • C73 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Stochastic and Dynamic Games; Evolutionary Games
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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