Abstract
Influenza vaccination decisions in one country can influence the size of an outbreak in other countries due to interdependent risks from infectious disease transmission. This paper examines the inefficiency in the allocation of influenza vaccines that is due to interdependent risk of infection across borders and proposes a contractual mechanism to reduce such inefficiencies. The proposed contract is based on an epidemic model that accounts for intranational transmission and that from a source country where the dominant strain emerges. The contract reduces the overall financial burden of infection globally and improves the total number infected by seasonal influenza outbreaks. This is consistent with recent recommendations to improve pandemic preparedness. Numerical experiments demonstrate that the benefits of the contract can prevent millions of influenza cases and save tens of millions of dollars, and that the benefits are even greater when cross-border transmission is higher, even if cross-border transmission parameters have moderate estimation errors. This paper was accepted by Martin Lariviere, operations management.
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