On Socializing and Social Distancing in Markets: Implications for Retail Prices, Store-level Consumer Density, and Disease Transmission
I generalize the "noisy search" model of Burdett and Judd (1983) to settings where individual buyers have preferences over the number of other buyers who visit the same seller as them. I consider a version in which buyers have a preference for social distancing derived from the risk of contracting a disease from other buyers, and use it to study the two-way equilibrium interaction between supply-side considerations (such as the distribution of prices posted by sellers) and individual buyers' behavioral responses to the risk of contagion. I find that the price response to the buyers' shift toward social distancing can be an important determinant of the degree to which buyers' individual behavioral responses to the risk of contagion can mitigate the spread of the disease.
I gratefully acknowledge research support from the C. V. Starr Center of Applied Economics at NYU, and thank Matías Moretti for outstanding research assistance. The views expressed herein are those of the author and do not necessarily reflect the views of the National Bureau of Economic Research. The views expressed herein are those of the author and do not necessarily reflect the views of the National Bureau of Economic Research.