Optimal epidemic control in equilibrium with imperfect testing and enforcement

We analyze equilibrium behavior and optimal policy within a Susceptible-Infected-Recovered epidemic model augmented with potentially undiagnosed agents who infer their health status social planner imperfect enforcement of distancing. define prove the existence perfect Bayesian Markov competitive contrast it efficient allocation subject to same informational constraints. identify two externalities, static (individual actions affect current risk infection) dynamic future disease prevalence), study how they are affected by limitations on testing enforcement. that will always wish curtail activity, but its incentives do so vanish as becomes perfect. When vaccine arrives far into future, may encourage activity before herd immunity. find lockdown policies have modest welfare gains, whereas quarantine effective even testing.