doi: 10.1111/j.1742-7363.2013.12016.x Information disclosure and vaccination externalities Xinyan Shi ∗ This paper examines the information disclosure problem when both positive and negative exter- nalities can arise for vaccination. During an epidemic outbreak, public disclosure on the level of infectiousness may potentially trigger a sudden increase in the demand for vaccination, which imposes external costs. The government has to choose an information disclosure policy to induce a level of vaccination that balances the benefits and costs of revealing information. I establish conditions under which a full disclosure is optimal in some circumstances and a non-disclosure or partial disclosure is optimal in other circumstances. I show that the feature of partial convexity restricts the scenarios in which pooling is desirable. Indeed, I find that it is never optimal to pool a sufficiently low infectiousness state with other states. Key words vaccination, externalities, information disclosure JEL classification D62, D82, I18 Accepted 30 May 2012 1 Introduction Much of the existing discussion concerning vaccination externalities focuses on its indirect benefit to the unvaccinated. Such externalities are based on the argument that, by immunizing yourself, you reduce the risk of contracting the disease for all the individuals around you, thus improving the welfare of the others. Since individuals are presumed to make decisions based on their own welfare, they fail to consider the full social impact of their decisions. Therefore, a suboptimal outcome may arise. To compel individuals to partake of available vaccinations, the government uses standard public health interventions, such as price subsidies and a mandatory vaccination program. During the 2009 swine flu outbreak, this conventional concern with insufficient voluntary vacci- nation was seemingly irrelevant. In 2009 the high infectiousness of the H1N1 strain caused anxiety and worry around the globe. In late April, the World Health Organization (WHO) announced the emergence of the H1N1 strain and raised the level of influenza pandemic alert to phase 6. 1 In many places, people waited in line for hours to be vaccinated. In some hospitals, emergency rooms were filled with people who wanted to either obtain the vaccine or be tested for the flu. The panic dis- tracted doctors and caused needless delays among patients who urgently needed treatment for more conventional ailments. Moreover, a rush for flu drugs caused additional dangers. Dean Blumberg ∗ Department of Economics, Finance and Decision Sciences, The University of North Carolina at Pembroke, Pembroke, USA. Email: shiyan@uncp.edu I would like to thank UNC-Chapel Hill professors Gary Biglaiser, Sandra Campo, Sergio O. Parreiras, Helen Tauchen and Duke professor Giuseppe (Pino) Lopomo for their insightful comments and suggestions. All remaining errors are my responsibility. 1 According to the updated guidance published by WHO in 2005, phase 6 is defined as a pandemic phase in which increased and sustained transmission in the general population has occurred. International Journal of Economic Theory 9 (2013) 229–243 © IAET 229