Economic Theory Seminar - Carlos Oyarzun (UQ)

Title:  Contagion Management through Information Disclosure (Jonas Hedlund, Allan Hernandez-Chanto and Carlos Oyarzun)

Abstract: We analyze information disclosure as a policy instrument for contagion management in decentralized environments. A benevolent planner (e.g., the government) tests a fraction of the population to learn the infection rate. Individuals meet randomly and exert vigilance effort. Efforts factor in a passage function to reduce the probability of contagion. We analyze the information disclosure policy that maximizes society’s expected welfare. When efforts are strategic substitutes, we provide, separately, sufficient and necessary conditions for full disclosure to be optimal. When efforts are strategic complements, the optimal policy features obfuscation. Here, pooling intermediate infection rates is optimal whenever individuals’ equilibrium effort jumps from no-effort (inaction) to full-effort (frenzy).