Optimal prevention and control of foot-and-mouth disease (FMD) in the Netherlands
07 / 2003 - 09 / 2008
METIS Wageningen Universiteit en Researchcentrum
The prevention and control of foot-and-mouth disease (FMD), incurring current financial and social costs, serve to avoid future damage caused by an FMD epidemic to the economy and the society. In this sense, they are long range investments competing with alternative uses of public or private resources. Besides being effective, the optimal prevention and control strategy should also be economically and socially justifiable. In the Netherlands, computerised simulations have greatly facilitated the economic analyses of various strategies as well as the investigation of the influences of regional effects and logistic capacities on optimal strategies, however, an optimisation framework incorporating these concerns is still missing. Uncertainty prevails in the evolution of an FMD epidemic and the response of society and market. Consequently, decisions have to be taken under uncertainty. Traditional cost-benefit analysis (CBA) or decision tree analysis (DTA) accounts for these uncertainties by calculating the expected gains or costs of the decisions in predetermined scenarios. While these approaches do recognise the uncertain, dynamic nature of the disease and market, they often assume a static decision making process: decisions are taken only at the beginning in a now-or-never fashion and once taken, never changed. Implicitly, the decision maker acts like a passive observer of future outcomes and blindly sticks to the selected plan no matter what unfolds. The passive view neglects the fact and possibility that in the prevention and control process, decisions can be made in stages as well as information comes in. At every stage, decision maker holds the option to take on a certain measure or wait to decide later. The option to wait has value because it offers decision maker more flexibility in later stages, this is especially important for irreversible decisions like the culling of animals or vaccination. Postponing decisions allows decision maker to collect more information and observe the outcomes of previous decisions. If uncertainty resolves (or partially) in favourable conditions in later stages, decision maker can gain extra benefit by adjusting original plans towards this favourable condition. This extra benefit, also called the "value of flexibility" comes from the option of holding the actions. As widely accepted, an immediate action is optimal only when its immediate return outperforms the option value of waiting. This critical criterion for investment under uncertainty has been so far overlooked in the analysis of FMD prevention and control strategies, which may lead to the selection of sub-optimal strategies. The objective of this project is to develop an options-based optimisation model to support decision making in the prevention and control of FMD epidemic under various circumstances. The main focus lies in economic grounds but the outcome of economic optimisation will contribute to the solutions of social problems related to FMD epidemics. By explicitly accounting for operational flexibility and logistic constraints, the model will help decision-maker to capitalise on favourable future conditions while avoiding severe losses to the economy and the society from an FMD epidemic.