title: Managing the Endogenous Risk of Disease Outbreaks with Non-Constant Background Risk.
abstract: There is a growing concern that risks of disease outbreak and pandemics are increasing over time. We consider optimal investments in prevention before an outbreak using an endogenous risk approach within an optimal control setting. Using the threat of pandemic influenza as an illustrative example, we demonstrate that prevention expenditures are relatively small in comparison to the potential losses facing the USA, and these expenditures need to be flexible and responsive to changes in background risk. Failure to adjust these expenditures to changes in background risk poses a significant threat to social welfare into the future.
authors.affiliation: University of Wyoming, Department of Economics and Finance, 1000 E University Avenue Laramie, Wyoming 82071. Finnoff) (307)766-5430 (Shogren).
authors.forename: Kevin
authors.initials: K
authors.lastname: Berry
authors.affiliation: University of Wyoming, Department of Economics and Finance, 1000 E University Avenue Laramie, Wyoming 82071. Finnoff) (307)766-5430 (Shogren).
authors.forename: David
authors.initials: D
authors.lastname: Finnoff
authors.affiliation: Department of Agricultural, Food and Resource Economics Michigan State University East Lansing, MI 48824-1039.
authors.forename: Richard D
authors.initials: RD
authors.lastname: Horan
authors.affiliation: University of Wyoming, Department of Economics and Finance, 1000 E University Avenue Laramie, Wyoming 82071. Finnoff) (307)766-5430 (Shogren).
authors.forename: Jason F
authors.initials: JF
authors.lastname: Shogren
keywords: endogenous risk; infectious disease; optimal control; prevention schedule