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Cournot Competition Under Yield Uncertainty: The Case of the U.S. Influenza Vaccine Market

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Author Info

  • Sarang Deo

    ()
    (Kellogg School of Management, Northwestern University, Evanston, Illinois 60201)

  • Charles J. Corbett

    ()
    (Anderson School of Management, University of California, Los Angeles, Los Angeles, California 90095)

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    Abstract

    This paper is inspired by the recurring mismatch between demand and supply in the U.S. influenza vaccine market. Economic theory predicts that an oligopolistic market with unregulated but costly entry will experience excess entry and oversupply, not the undersupply observed in the market for influenza vaccine in recent years. In this paper, we examine the interaction between yield uncertainty, a key characteristic of many production processes, including that for influenza vaccine, and firms' strategic behavior. We find that yield uncertainty can contribute to a high degree of concentration in an industry and a reduction in the industry output and the expected consumer surplus in equilibrium. We use parameter values loosely based on the U.S. influenza vaccine market to numerically illustrate the impact of yield uncertainty.

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    File URL: http://dx.doi.org/10.1287/msom.1080.0242
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    Bibliographic Info

    Article provided by INFORMS in its journal Manufacturing & Service Operations Management.

    Volume (Year): 11 (2009)
    Issue (Month): 4 (July)
    Pages: 563-576

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    Handle: RePEc:inm:ormsom:v:11:y:2009:i:4:p:563-576

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    Related research

    Keywords: Cournot competition; influenza vaccine; yield uncertainty; market structure;

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    Cited by:
    1. David F. Drake, 2011. "Carbon Tariffs: Impacts on Technology Choice, Regional Competitiveness, and Global Emissions," Harvard Business School Working Papers 12-029, Harvard Business School.
    2. Liu, Zugang (Leo) & Anderson, Trisha D. & Cruz, Jose M., 2012. "Consumer environmental awareness and competition in two-stage supply chains," European Journal of Operational Research, Elsevier, vol. 218(3), pages 602-613.
    3. Adida, Elodie & Dey, Debabrata & Mamani, Hamed, 2013. "Operational issues and network effects in vaccine markets," European Journal of Operational Research, Elsevier, vol. 231(2), pages 414-427.
    4. Masoumi, Amir H. & Yu, Min & Nagurney, Anna, 2012. "A supply chain generalized network oligopoly model for pharmaceuticals under brand differentiation and perishability," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 48(4), pages 762-780.

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