On the Value of Alert Systems and Gentle Rule Enforcement in Addressing Pandemics

The COVID-19 pandemic poses a major challenge to policy makers on how to encourage compliance to social distancing and personal protection rules. This paper compares the effectiveness of two policies that aim to increase the frequency of responsible health behavior using smartphone-tracking applications. The first involves enhanced alert capabilities, which remove social externalities and protect the users from others’ reckless behavior. The second adds a rule enforcement mechanism that reduces the users’ benefit from reckless behavior. Both strategies should be effective if agents are expected-value maximizers, risk averse, and behave in accordance with cumulative prospect theory (Tversky and Kahneman, 1992) or in accordance with the Cognitive Hierarchy model (Camerer et al., 2004). A multi-player trust-game experiment was designed to compare the effectiveness of the two policies. The results reveal a substantial advantage to the enforcement application, even one with occasional misses. The enhanced-alert strategy was completely ineffective. The findings align with the small samples hypothesis, suggesting that decision makers tend to select the options that lead to the best payoff in a small sample of similar past experiences. In the current context, the tendency to rely on a small sample appears to be more consequential than other deviations from rational choice.