Managing Vaccination for Infectious Diseases: The Role of Bounded Rationality

Abstract

Under the assumption of full rationality, the existing literature shows that self-interested individuals ignore the social benefit of protecting others when making vaccination decisions (positive externality), which results in social welfare loss. In this paper, we study the impact of individual bounded rationality in vaccination settings. We develop a simple game-theoretic model, in which individuals boundedly rationally estimate the probability of being infected through anecdotal reasoning. We characterize individuals' optimal vaccination decisions and examine the commonly used vaccination incentive programs in practice to provide managerial guidelines for a social planner. We find that individual bounded rationality may lead to underestimation and overestimation of the vaccinated fraction of the population, which depends on the zero-risk vaccinated fraction and the number of obtained anecdotes. The underestimation of the vaccinated fraction would lead to a positive externality improving social welfare. When the zero-risk vaccination fraction is low and the vaccination cost is at a particular level, the negative effect of self-interested individuals' vaccination decisions could be completely eliminated because of bounded rationality and thus the socially optimal welfare is achieved. In sharp contrast to the setting of full rationality, we show that inducing the optimal social welfare by vaccination incentives may never be cost-effective under individual bounded rationality. We characterize how to design the optimal incentive programs. Finally, we extend our model to a dynamic vaccination decision setting, and find that individual bounded rationality may lead to delayed vaccination.

Note:
Funding Statement: No funding for this project.

Declaration of Interests: There is no competing interest.

Keywords: vaccination decision, bounded rationality, anecdotal reasoning, externality, vaccination incentives