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European Review of Agriculture Economics Vol 26 (1) (1999) pp.39-58
© 1999 Oxford University Press and the Foundation for the European Review of Agricultural Economics

Irreversible decision making in contagious animal disease control under uncertainty: an illustration using FMD in Brittany

O Mahul and A Gohin

Institut National de la Recherche Agronomique, Rennes, France
Correspondence to: Olivier Mahul, INRA, Department of Economics, 65 Rue de St Brieuc, 35042 Rennes Cedex, France
e-mail: mahul@roazhon.inra.fr

Summary

The concept of irreversible investment is applied to highly contagious animal disease control when uncertainty about the spread of the disease is resolved over time. In comparison with the strategy of destroying infected herds, the vaccination programme causes additional losses that cannot be recovered. These sunk costs are thus irreversible. Therefore, the gain from waiting for new information, namely the quasi-option value, should induce animal health authorities to delay the decision to vaccinate if the probability of a widespread epidemic is not too high. A numerical example is developed for foot and mouth disease (FMD) in Brittany.

Keywords:contagious animal disease, irreversible control strategy, foot and mouth disease, gain from waiting


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