DP16112 Lockdowns as options
| Author(s): | Sweder van Wijnbergen |
| Publication Date: | May 2021 |
| Keyword(s): | Irreversibility, lockdowns, Pandemic Dynamics, real options, Stochastic Vaccination arrival Information |
| JEL(s): | G12, G13, G18 |
| Programme Areas: | Financial Economics |
| Link to this Page: | cepr.org/active/publications/discussion_papers/dp.php?dpno=16112 |
I show that the irreversibility of dying coupled with gradual information acquisition over time on the likely arrival and eventual effectiveness of vaccines confers a real option value to lockdown strategies that delay the incidence of a pandemic.The case for lockdown strategies becomes stronger the more likely vaccine discovery is, and the less uncertainty exists about its effectiveness.