Should Firms Voluntarily Implement Social Distancing Measures During the COVID-19 Pandemic?

Using a simple economic model based on Hotelling (1929), we try to find out whether service providers should voluntarily implement social distancing measures during the COVID-19 pandemic. Our results suggest that it can be beneficial for non-essential service providers 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 minimizing the spread of the disease among its customers. Hence, simply encouraging (and not enforcing) social distancing cannot guarantee essential services implementing them. However, a social planner who wants to maximize social welfare, may implement them even when profit-oriented firms do not