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Faculty of Economics

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Toxvaerd, F.M.O.

Rational Disinhibition and Externalities in Prevention

International Economic Review

Vol. 60 no. 4 pp. 1737-1755 (2019)

Abstract: This paper studies a model of disease propagation in which rational and forward-looking individuals can control their exposure to infection by engaging in costly preventive behavior. Equilibrium outcomes under decentralized decision making are characterized and contrasted to the outcomes chosen by a social planner. In general, individuals over-expose themselves to infection, leading to suboptimally high disease prevalence. The model is applied to study the welfare effects of pre-exposure prophylaxis, which reduces transmission between serodiscordant couples and causes disinhibition. It is shown that a decrease in the induced infection risks increases disease prevalence and can lead to decreases in overall welfare.

Keywords: Economic epidemiology, preventive behavior, disinhibition, immiserization, second-best policies

JEL Codes: C73, I18

Author links: Flavio Toxvaerd  

Publisher's Link: https://doi.org/10.1111/iere.12402



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