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City and Regional Demand for Vaccines Whose Supply Arises from Competition in a Bertrand Duopoly

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Listed:
  • Batabyal, Amitrajeet
  • Beladi, Hamid

Abstract

We study a one-period model of an aggregate economy composed of cities and regions that demand vaccines designed to fight a pandemic such as Covid-19. The supply of vaccines is the outcome of Bertrand competition between two firms A and B. The marginal cost of producing the vaccine for both firms is stochastic and drawn from a uniform distribution. In this setting, we perform three tasks. First, we describe the equilibrium pricing strategies of the two firms and then we compute their mean ex ante profits. Second, we permit both firms to conduct risky R&D and then determine the conditions under which only one firm engages in R&D and conditions under which both do. Finally, we introduce a way of mimicking the effect of increased competition and then analyze the impact of this increased competition on the incentives to conduct R&D faced by the two firms.

Suggested Citation

  • Batabyal, Amitrajeet & Beladi, Hamid, 2022. "City and Regional Demand for Vaccines Whose Supply Arises from Competition in a Bertrand Duopoly," MPRA Paper 113758, University Library of Munich, Germany, revised 28 Jun 2022.
    • Handle: RePEc:pra:mprapa:113758
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    File URL: https://mpra.ub.uni-muenchen.de/113758/1/MPRA_paper_113758.pdf
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    References listed on IDEAS

    as
    1. Batabyal, Amitrajeet & Beladi, Hamid, 2021. "Health Interventions in a Poor Region and Resilience in the Presence of a Pandemic," MPRA Paper 112159, University Library of Munich, Germany, revised 11 Jan 2022.
    2. Fu, Qiang & Lu, Jingfeng & Lu, Yuanzhu, 2012. "Incentivizing R&D: Prize or subsidies?," International Journal of Industrial Organization, Elsevier, vol. 30(1), pages 67-79.
    3. Martonosi, Susan E. & Behzad, Banafsheh & Cummings, Kayla, 2021. "Pricing the COVID-19 vaccine: A mathematical approach," Omega, Elsevier, vol. 103(C).
    4. Jean Tirole, 1988. "The Theory of Industrial Organization," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262200716, December.
    5. Michael Kremer & Jonathan Levin & Christopher M. Snyder, 2022. "Designing Advance Market Commitments for New Vaccines," Management Science, INFORMS, vol. 68(7), pages 4786-4814, July.
    6. Stiglitz, Joseph E., 2021. "Globalization in the aftermath of the pandemic and trump," Journal of Policy Modeling, Elsevier, vol. 43(4), pages 794-804.
    7. Patricia Danzon & Nuno Sousa Pereira, 2011. "Vaccine Supply: Effects of Regulation and Competition," International Journal of the Economics of Business, Taylor & Francis Journals, vol. 18(2), pages 239-271.
    8. Els Torreele, 2020. "Business-as-Usual will not Deliver the COVID-19 Vaccines We Need," Development, Palgrave Macmillan;Society for International Deveopment, vol. 63(2), pages 191-199, December.
    9. Wanke, Peter F., 2008. "The uniform distribution as a first practical approach to new product inventory management," International Journal of Production Economics, Elsevier, vol. 114(2), pages 811-819, August.
    Full references (including those not matched with items on IDEAS)

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    More about this item

    Keywords

    Bertrand Duopoly; City; Innovation; R&D; Region; Vaccine;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • O32 - Economic Development, Innovation, Technological Change, and Growth - - Innovation; Research and Development; Technological Change; Intellectual Property Rights - - - Management of Technological Innovation and R&D
    • R11 - Urban, Rural, Regional, Real Estate, and Transportation Economics - - General Regional Economics - - - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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