Strategically Rational Risk Taking by Age in COVID-19, and the Heterogeneous Agent Behavioral SIR Model

Abstract

Given the dramatic age variation in COVID death rates, we create a heterogeneous agent version of the Behavioral SIR contagion model of Engle et al. (2020). The Bayes Nash equilibrium of our infection avoidance game yields a simple new log-linear relationship between the case fatality rate (CFR) and COVID incidence: Everyone knows that everyone optimizes vigilance both for both the prevalence and their CFR. We explain 2020 CDC incidence data for the USA north-east in terms of the CFR to age-specific COVID death data for Massachusetts. Our model is statistically significant: A 10% higher CFR reduces incidence by about 1%. ∗Robert C. Vackar College of Business & Entrepreneurship, University of Texas at Rio Grande Valley. Email: [email protected]. †Robert C. Vackar College of Business & Entrepreneurship, University of Texas at Rio Grande Valley. Email: [email protected]. ‡Economics Department, University of Wisconsin. Email: [email protected].