Strategic Interactions Among Private and Public Efforts When Preventing and Stamping Out a Highly Infectious Animal Disease

Upon the outbreak of a contagious animal disease, a primary motive for restoring disease-free status is often to regain access to international product markets. Efforts applied toward continuing or regaining such access generate a public good—all growers benefit regardless of the extent of private effort taken, while exclusion is impractical. Private incentives to take preventive measures and stamp-out effort interact in complex ways. There are intra-farm temporal interactions and also inter-farm contemporaneous interactions. Public effort also takes place and interacts with private effort. This paper provides a succinct multi-agent model to explore these interactions in social optimum and in Nash equilibrium, and also to explore how socially optimal and Nash behavior differ. Comparative statics under social optimality are more straightforward than under Nash equilibrium. Whether it is in social optimum or Nash equilibrium, public prevention effort complements both private prevention and private stamp-out efforts. However, public stamp-out effort substitutes for both private stamp-out and private prevention efforts. Reasonable conditions are identified under which Nash levels of private prevention and stamp-out efforts are both below socially optimal levels. Concerning policy prescriptions, secure property rights and low property transfer costs should promote prevention and eradication efforts. Other things being equal, public prevention effort should be more effective at improving welfare than comparable public stamp-out effort. Subsidies on private effort should favor prevention because subsidies on eradication effort may discourage prevention effort. Even if products from diseased animals are safe to consume and acceptable to consumers, it may be optimal to destroy them.