Economics and Finance Faculty Publications and Presentations

Document Type

Article

Publication Date

2-2021

Abstract

Given the dramatic age variation in COVID death rates, we create a heterogeneous agent version of the Behavioral SIR contagion model of Engle et al. (2020). The Bayes Nash equilibrium of our infection avoidance game yields a simple new log-linear relationship between the case fatality rate (CFR) and COVID incidence: Everyone knows that everyone optimizes vigilance both for the prevalence and their CFR. We explain 2020 CDC incidence data for the USA north-east in terms of the CFR to age-specific COVID death data for Massachusetts. Our model is statistically significant: A 10% higher CFR reduces incidence by about 1%.

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