The social value of information in times of epidemic

Abstract: We analyze an epidemiological model in which individuals trade the costs and benefits of social distancing while being uncertain about the dynamics of the epidemic. We characterize the unique symmetric equilibrium and show that uncertainty can be the cause of an additional wave of infections. We calibrate our model to the COVID-19 pandemic and simulate the dynamics of the epidemic to illustrate the impact of uncertainty on social distancing. We show that uncertainty about the epidemic dynamics can be welfare improving, both in terms of fraction of deaths and average payoffs.