Modeling Regional Externalities with Heterogeneous Incentives and Fixed Boundaries: Applications to Foot and Mouth Disease Control in South America.

For over a century, the countries of South America's Southern Cone have struggled to control or eradicate foot and mouth disease (FMD). These efforts have been undermined by a pronounced spatial spillover of the FMD virus. Because the virus spreads readily, the effectiveness of control efforts in one country, or on one ranch, is influenced by control efforts in nearby countries or ranches. These spatial effects are compounded by variations in incentives to control the disease and diverse sensitivities to neighbors. This article seeks to demonstrate how control behavior is affected by spatial spillovers of varied intensity and by heterogeneous incentives to control disease.