Strategic Individual Behaviors and the Efficient Vaccination Subsidy

Abstract

Abstract This study addresses the issue of how to set a consumer price of a vaccination against an infectious disease. We especially focus on the effects of strategic behaviors of individuals within a social group. In characterizing an equilibrium level of vaccination rate, the spill-over effect of vaccination is important not only in the light of group efficiency but also from each individual’s viewpoint. By constructing a simple game-theoretic model under the Nash conjecture where individuals rationally predict the resulting vaccination rate based on their own information, we analyze how the efficient vaccination subsidy is related to epidemiological as well as economic variables. In particular, we show that individuals over-react to the changes in their expectations over the virulency of a disease and also over the scale of adverse effects of vaccinations. We also discuss the necessary adjustment of a vaccination price when the public have misperception over certain epidemiological parameters.