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Learning versus habit formation: Optimal timing of lockdown for disease containment

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  • Bandyopadhyay, Siddhartha
  • Chatterjee, Kalyan
  • Das, Kaustav
  • Roy, Jaideep
Abstract
We analyze a model where the government has to decide whether to impose a lockdown in a country to prevent the spread of a possibly virulent disease. If the government decides to impose a lockdown, it has to determine its intensity, timing and duration. We find that there are two competing effects that push the decision in opposite directions. An early lockdown is beneficial not only to slow down the spread of the disease, but creates beneficial habit formation (such as social distancing, developing hygienic habits) that persists even after the lockdown is lifted. Against this benefit of an early lockdown, there is a cost from loss of information about the virulence and spread of the disease in the population in addition to a direct cost to the economy. Based on the prior probability of the disease being virulent, we characterize the timing, intensity and duration of a lockdown with the above mentioned tradeoffs. Specifically, we show that as the precision of learning goes up, a government tends to delay the imposition of lockdown. Conversely, if the habit formation parameter is very strong, a government is likely to impose an early lockdown.

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  • Bandyopadhyay, Siddhartha & Chatterjee, Kalyan & Das, Kaustav & Roy, Jaideep, 2021. "Learning versus habit formation: Optimal timing of lockdown for disease containment," Journal of Mathematical Economics, Elsevier, vol. 93(C).
    • Handle: RePEc:eee:mateco:v:93:y:2021:i:c:s0304406820301294
    DOI: 10.1016/j.jmateco.2020.11.008
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    3. Elena Gubar & Laura Policardo & Edgar J. Sanchez Carrera & Vladislav Taynitskiy, 2021. "Optimal Lockdown Policies driven by Socioeconomic Costs," Papers 2105.08349, arXiv.org.
    4. Shomak Chakrabarti & Ilia Krasikov & Rohit Lamba, 2022. "Behavioral epidemiology: An economic model to evaluate optimal policy in the midst of a pandemic," Papers 2202.04174, arXiv.org.
    5. Raouf Boucekkine & Shankha Chakraborty & Aditya Goenka & Lin Liu, 2024. "A Brief Tour of Economic Epidemiology Modelling," LIDAM Discussion Papers IRES 2024002, Université catholique de Louvain, Institut de Recherches Economiques et Sociales (IRES).
    6. Sun, Rui & Zhao, Yikai, 2023. "Intervention uncertainty, household health, and pandemic," Journal of Mathematical Economics, Elsevier, vol. 105(C).
    7. Abderrahim Taamouti, 2021. "Covid‐19 Control and the Economy: Test, Test, Test," Oxford Bulletin of Economics and Statistics, Department of Economics, University of Oxford, vol. 83(5), pages 1011-1028, October.

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