Working Paper: NBER ID: w27124
Authors: Zhihan Cui; Geoffrey Heal; Howard Kunreuther
Abstract: Social distancing via shelter-in-place strategies has emerged as the most effective way to combat Covid-19. In the United States, choices about such policies are made by individual states. Here we show that the policy choice made by one state influences the incentives that other states face to adopt similar policies: they can be viewed as strategic complements in a supermodular game. If they satisfy the condition of uniform strict increasing differences then following Heal and Kunreuther ([6]) we show that if enough states engage in social distancing, they will tip others to do the same and thus shift the Nash equilibrium with respect to the number of states engaging in social distancing.
Keywords: COVID-19; shelter-in-place; strategic complementarity; Nash equilibrium
JEL Codes: C72; I12; I18
Edges that are evidenced by causal inference methods are in orange, and the rest are in light blue.
| Cause | Effect |
|---|---|
| One state's SIP policy (H79) | Incentivizes other states to adopt SIP policies (H79) |
| Sufficient number of states adopting SIP policies (H73) | Shift in Nash equilibrium (C72) |
| One state's SIP policy (H79) | Infection rates in neighboring states (H73) |
| Infection rates in neighboring states (H73) | Influence their policy decisions (D72) |
| Adoption of SIP policies by neighboring states (H73) | Lower incremental economic costs for implementing SIP policies (Q52) |
| Political orientation of governors (D72) | Implementation of SIP orders (C69) |