Disclosure in Epidemics

Abstract

We study information disclosure as a policy tool to minimize welfare losses in epidemics through mitigating healthcare congestion. We first present a stylized model of the healthcare congestion game to show that congestion occurs only when individuals expect the disease to be sufficiently severe, and it leads to misallocation of scarce healthcare resources. Coarse information disclosure, compared with full transparency, can be welfare-improving, as it can help avoid some congestion when the true severity level is high. The optimal disclosure policy features a middle censorship rule, which censors an intermediate range of severity levels and fully reveals all other states. Under the optimal policy, when information is censored, the healthcare system is run at its full capacity without congestion and, thus, achieves ex post efficiency. In an epidemic outbreak, the optimal censorship range expands if the disease is more infectious; and the optimal disclosure policy censors (weakly) higher severity levels but fully reveals (strictly) lower severity levels if the healthcare system is more prepared.

Keywords: Epidemics, Disclosure, Congestion, Information Design

JEL Classification: C72, D82, D83, I18