Free and Perfectly Safe but Only Partially Effective Vaccines Can Harm Everyone
19 Pages Posted: 23 Jan 2018 Last revised: 4 Mar 2019
Date Written: February 27, 2019
Risk compensation can undermine the ability of partially-effective vaccines to curb infectious-disease epidemics: Vaccinated agents may optimally choose to engage in more risky interactions and, as a result, may increase everyone’s infection probability. We show how—in contrast to the prediction of standard models—things can be worse than that: Free and perfectly safe but only partially effective vaccines can harm everyone, and hence fail to satisfy—in a strong sense—the fundamental principle of “first, do no harm.” Our main departure from standard economic epidemiological models is that we allow agents to strategically choose their partners, which we show creates strategic complementarities in risky interactions. As a result, the introduction of a partially-effective vaccine can lead to a much denser interaction structure—whose negative externalities overwhelm the beneficial direct effects of this intervention.
Keywords: Network formation, risk compensation, welfare, strategic complementarities, externalities
JEL Classification: C72, D85, I18
Suggested Citation: Suggested Citation