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A Model of Crisis Management

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Abstract

We propose a model of how multiple societies respond to a common crisis. A government faces a "damned-either-way" policy-making dilemma: aggressive intervention contains the crisis, but the resulting good outcome makes people skeptical about the costly response; light intervention worsens the crisis and causes the government to be faulted for not doing enough. When multiple societies encounter the crisis sequentially, due to this policymaking dilemma, late societies may underperform despite having more information, while early societies can benefit from a dynamic counterfactual effect.

Suggested Citation

  • Fei Li & Jidong Zhou, 2020. "A Model of Crisis Management," Cowles Foundation Discussion Papers 2266R, Cowles Foundation for Research in Economics, Yale University, revised Apr 2022.
    • Handle: RePEc:cwl:cwldpp:2266r
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    File URL: https://cowles.yale.edu/sites/default/files/files/pub/d22/d2266-r.pdf
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    More about this item

    Keywords

    Crisis Management; Counterfactual Effect; Political Accountability; Public Policy; Pandemic;
    All these keywords.

    JEL classification:

    • D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information; Mechanism Design
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • F50 - International Economics - - International Relations, National Security, and International Political Economy - - - General
    • H12 - Public Economics - - Structure and Scope of Government - - - Crisis Management

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