Kellogg Podcast on Sunk Costs
Sandeep Baliga
Jeff Ely Microeconomic Theory, Game Theory, Behavioral Economics, Evolution
Joint with Andrea Galeotti and Jakub Steiner
We study rotation schemes that govern individuals’ activities within an organization during an epidemic. We optimize the frequency of rotation and degree of cross-mixing of the rotating subpopulations. Frequency affects risk over the length of diffusion within the infected subpopulation until the organization detects and/or reacts to the infection. If the reaction time is short, then such risk is undesirable since the growth of the prevalence is initially convex in time.
Frequent rotation, which acts as insurance against exposure time risk, is then optimal. Infrequent rotation becomes optimal if the organization reacts slowly. Mixing of the rotating subpopulations is detrimental because it increases the share of interactions between sick and healthy individuals. However, the effect of mixing is small if the terminal prevalence is low in the absence of mixing.
Read it here.Jeff Ely is the Charles E. and Emma H. Morrison Professor of Economics at Northwestern University and an accomplished latte-artist. He is the director of the Program in Mathematical Methods in the Social Sciences at Northwestern, a member of several editorial boards and co-author of the blog Cheap Talk.
Sandeep Baliga
The Wall Street Journal Numbers