Free and perfectly safe but only partially effective vaccines can harm everyone.

Risk compensation can undermine the ability of partially-effective vaccines to curb epidemics: Vaccinated agents may optimally choose to engage in more risky interactions and, as a result, may increase everyone's infection probability. We show that-in contrast to the prediction of standard models-things can be worse than that: Free and perfectly safe but only partially effective vaccines can reduce everyone's welfare, and hence fail to satisfy-in a strong sense-the fundamental principle of "first, do no harm." Our main departure from standard economic epidemiological models is that we allow agents to strategically choose their partners, which we show creates strategic complementarities in risky interactions. As a result, the introduction of a partially-effective vaccine can lead to a much denser interaction structure-whose negative welfare effects overwhelm the beneficial direct welfare effects of this intervention.