An Analytical Model of Behavior and Policy in an Epidemic

This paper examines the behavior of individuals susceptible to a deadly disease in a tractable equilibrium setting. We analytically characterize individually optimal mitigation behavior and the resulting equilibrium trajectory. Analysis is facilitated by a phase diagram. A key insight is that individually optimal behavior of those susceptible to the disease results in excessive caution. This behavior flattens the epidemic curve and prolongs the epidemic. In contrast, socially optimal behavior results in a higher infection rate, with a focus on minimizing cumulative deaths at minimum cost. The paper offers novel technical contributions and an improved understanding of externalities in econ-epi models. (JEL D62, D91, I12, I18)