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During the COVID-19 pandemic, most governments around the world have introduced social distancing measures to reduce social interaction between people. Those measures could be introduced on national, regional and local levels depending on particular country. They range from advice about not leaving home (self-isolation) to strict quarantine measures. The choice of  particular measures relies on  the trade-off between preserving as many lives as possible and maintaining the economic well-being of population. In this paper, we use theoretical tools to investigate which strategies are the most beneficial in providing social welfare. Thus, we apply the “prisoner’s dilemma” to model individual decision-making process regarding social distancing. We show that the decision on whether to comply or not with the quarantine regime depends on the individual preferences, as well as the losses incurred by isolation, and the likelihood of receiving necessary and timely medical care in case of illness. We draw parallels between our findings and real quarantine measures that have been applied in different ountries. Theoretically, we show that universal full-scale quarantine measures (total stay-home policy) cannot be considered as the most beneficial policy from the social welfare perspective. Instead, planning strategic incentives for different homogeneous population groups is a more preferable strategy.