NBER

Michael Barnett

W. P. Carey School of Business
Arizona State University
Department of Finance
300 E Lemon St
Tempe, AZ 85287

E-Mail: EmailAddress: hidden: you can email any NBER-related person as first underscore last at nber dot org
Institutional Affiliation: Arizona State University

NBER Working Papers and Publications

May 2020Epidemic Responses Under Uncertainty
with Greg Buchak, Constantine Yannelis: w27289
We examine how policymakers should react to a pandemic when there is significant uncertainty regarding key parameters relating to the disease. In particular, this paper explores how optimal mitigation policies change when incorporating uncertainty regarding the Case Fatality Rate (CFR) and the Basic Reproduction Rate (R0) into a macroeconomic SIR model in a robust control framework. This paper finds that optimal policy under parameter uncertainty generates an asymmetric optimal mitigation response across different scenarios: when the disease’s severity is initially underestimated the planner increases mitigation to nearly approximate the optimal response based on the true model, and when the disease’s severity is initially overestimated the planner maintains lower mitigation as if there is...

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