Why Perfect Tests May Not be Worth Waiting For: Information as a Commodity
41 Pages Posted: 6 May 2020
Date Written: April 11, 2020
Information products provide agents with additional information that is used to update their actions. In many situations, access to such products can be quite limited. For instance, in epidemics, there tends to be a limited supply of medical testing kits, or tests. These tests are information products because their output of a positive or a negative answer informs individuals and authorities on the underlying state and the appropriate course of action. In this paper, using an analytical model, we show how the accuracy of a test in detecting the underlying state serves as a rationing device to ensure that the limited supply of information products is appropriately allocated to the high demand by heterogeneous agents. On the technical side, we find that in many settings, providing perfect information (or a perfect test) is sub-optimal, and a moderately good test is preferable. On the policy side, we use a numerical study of an evolving epidemic to confirm our theoretically derived insight that in the early stages of an epidemic investing on higher testing quality is not beneficial if testing availability is low.
Keywords: Information Products, Information Operations, Epidemics, Testing
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