Should firms voluntarily implement prevention measures during the COVID-19 pandemic?

Abstract

Using a simple economic model based on Hotelling (1929) [Stability in competition. Economic Journal, 39, 41–57], we try to find out whether retailers and service providers should voluntarily implement prevention measures, such as social-distancing and mask-mandates, during the COVID-19 pandemic. Our results suggest that it can be beneficial for non-essential services to attract more customers by reducing the threat of virus transmission. However, essential services often exist in a saturated market where the providers cannot increase market share merely by minimising the spread of the disease among its customers. Hence, simply encouraging (and not enforcing) prevention measures cannot guarantee essential services implementing them. However, a social planner who wants to maximise social welfare, may implement them even when profit-oriented firms do not.

Keywords:

• Coronavirus
• prevention measures
• COVID-19
• hotelling
• competition
• pricing

Disclosure statement

No potential conflict of interest was reported by the author(s).

Data availability statement

Data sharing is not applicable to this article as no new data were created or analysed in this study.

Notes

1 Centers for Disease Control and Prevention

2 Governor Newsom encouraging but not enforcing prevention measures. Governing.com

3 Most UK cinemas shut after virus advice. BBC News

4 Police across Texas are enforcing prevention measures, but they′re hesitant to make arrests. The Texas Tribune

5 Cuomo says NYPD needs to enforce prevention measures rules. The Hill

6 Governor Carney Restricts Gatherings, Requires Businesses to Strictly Comply with Prevention Delaware.gov, The Federal Government will force even more businesses shut as Australia approaches a full lockdown. Business Insider

7 Rallies continue against statewide restrictions aimed at slowing coronavirus spread. Washington Post

8 We will use the terms ‘retailers’ and ‘firms’ interchangeably to refer to the service providers.

9 Here's the difference between an 'essential' business and a 'nonessential' business as more than 30 states have imposed restrictions. Business Insider

10 Wegmans now limiting the number of customers in stores. Wegmans

11 Wegmans Issues Purchase Limits on High Demand Items. Wegmans

12 Changes to Our Shopping Process to Encourage Prevention. Walmart

13 SHRM.org

14 Note that we are talking about profit-oriented firms and not non-profit or charitable organisations

15 Equinox and SoulCycle to require proof of vaccination starting in September CNBC

16 Proof of COVID vaccination is required now at DC gym VIDA Fitness WUSA9

17 ‘Traumatized And Exhausted’ Bar And Restaurant Owners Impose Vaccine Requirements, Mask Mandates As Delta Variant Hits City Block Club Chicago

18 Jacksonville restaurants again requiring face masks, taking other precautions against COVID-19 Jacksonville.com

19 Disney World Reopening Disney World

20 Walmart, Target, Lowe's, Kohl's, Publix update mask policies for employees; encourage customers to wear masks USA Today

21 Walmart, CVS won't enforce mask rules to avoid conflict with customers CNET

22 Restaurant that took anti-mask stance now says it will only serve unvaccinated dinersToday.com

23 ‘Can a franchisor set prices?’ https://www.accc.gov.au/update/franchising-code-frequently-asked-questions#can-a-franchisor-set-prices-

24 The indifferent customers are equidistant on either side of the firm's service type.

25 Firm i does not invest if the profit when investing is less than the profit when it is not investing.

Additional information

Funding

D.J O'Conor Fellowship, Xavier University Summer Research Grant 2023

Notes on contributors

Jagan Jacob

Dr. Jagan Jacob is an assistant professor of business analytics in the Williams College of Business at Xavier University, USA.He received a Ph.D. in Business Administration from The University of Rochester. In his research, Dr.Jacob uses mathematical models to solve problems related to revenue management,service operations, and strategic competition between firms.His teaching interests includes operations management, supply chain management, simulation, and optimization.