Optimal Lockdown Policy with Virus Mutation

CREPE Discussion Paper No. 187

Abstract

We examine the implications of virus mutation for optimal lockdown policy in an epimacro model. We consider one deterministic specification and two stochastic specifications with two-state and three-state Markov processes. The effects of mutation are asymmetric: a future reduction in the transmission rate increases optimal lockdown intensity by more than a future rise in the transmission rate lowers it. Consequently, greater uncertainty about future mutation is non-neutral and reduces lockdown intensity under the optimal policy.