Lockdowns as Options

Tinbergen Institute Discussion Paper 2021-037/IV

11 Pages Posted: 12 May 2021

See all articles by Sweder van Wijnbergen

Sweder van Wijnbergen

Universiteit van Amsterdam; Tinbergen Institute; Centre for Economic Policy Research (CEPR); National Bureau of Economic Research (NBER)

Multiple version iconThere are 3 versions of this paper

Date Written: May 5, 2021

Abstract

I show that the irreversibility of dying coupled with gradual information acquisition over time on the likely arrival and eventual effectiveness of vaccines confers a real option value to lockdown strategies that delay the incidence of a pandemic.The case for lockdown strategies becomes stronger the more likely vaccine discovery is, and the less uncertainty exists about its effectiveness.

Keywords: Pandemic Dynamics, Stochastic Vaccine arrival, information acquisition, irreversibility, lockdowns, real options

JEL Classification: G12, G13, G18

Suggested Citation

van Wijnbergen, Sweder, Lockdowns as Options (May 5, 2021). Tinbergen Institute Discussion Paper 2021-037/IV, Available at SSRN: https://ssrn.com/abstract=3842419 or http://dx.doi.org/10.2139/ssrn.3842419

Sweder Van Wijnbergen (Contact Author)

Universiteit van Amsterdam ( email )

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Tinbergen Institute

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Centre for Economic Policy Research (CEPR)

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