The game theory applied to the Covid-19 pandemic

Abstract

The classification of COVID-19 as a pandemic by the World Health Organization (WHO), substantiated a global crisis in public and economic health, exposing failures of governments and markets in terms of the ability to act in a corrective, preventive and, above all, predictive manner, given the appearance of exogenous factors. One of the visible consequences of the pandemic is the polarization between Economy and Health in the countries, creating a competitive environment that resembles a duopoly where each player ends up acting and making their decisions according to what the other does. This article considers this scenario by quantitatively evaluating economic results that are possible to be achieved when in a negotiation essay between ‘Economics’ and ‘Health’, using the economic theory of games. The discussion developed points out to the existence of an “optimal strategy” for both the ‘Economy’ and ‘Health’ player, capable of maximizing the expected payoff for the population. From the application of the Pareto Equilibrium combined with the Coase Theorem, there is an opportunity to eliminate market and government failures with the achievement of a ‘Social Optimum’ throughout this and eventual future pandemics.