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An industrial organization perspective on the influenza vaccine shortage

Author

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  • F.M. Scherer

    (John F. Kennedy School of Government, Harvard University Emeritus, USA)

Abstract

This paper analyzes reasons advanced for the recent shortage of influenza vaccine in the United States and numerous other similar shortages in recent years. Explanations have included high regulatory costs, inadequate profitability, and mergers. Using Census data, it shows that vaccine producers realize unusually high price-cost margins, but are probably also unusually capital-intensive. Applying theories of scale economies to existing information, it identifies the extent to which, for diverse types of vaccines, economies of scale limit the number of vaccine producers, exposing the nation to stochastic shortage risk. A benefit|cost analysis explores whether it is economically worthwhile to maintain additional production sources with surge capacity. It is found that under plausible demand, external benefit, and stochastic supply failure conditions, such multiple sourcing yields more benefits than its cost. Copyright © 2007 John Wiley & Sons, Ltd.

Suggested Citation

  • F.M. Scherer, 2007. "An industrial organization perspective on the influenza vaccine shortage," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 28(4-5), pages 393-405.
    • Handle: RePEc:wly:mgtdec:v:28:y:2007:i:4-5:p:393-405
    DOI: 10.1002/mde.1349
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    References listed on IDEAS

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    1. Amy Finkelstein, 2003. "Health Policy and Technological Change: Evidence from the Vaccine Industry," NBER Working Papers 9460, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Ginger Zhe Jin & Thomas G. Koch, 2018. "Learning by Suffering? Patterns in Flu Shot Take-up," NBER Working Papers 25272, National Bureau of Economic Research, Inc.
    2. 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.
    3. Alcalde, José & Dahm, Matthias, 2013. "Competition for procurement shares," Games and Economic Behavior, Elsevier, vol. 80(C), pages 193-208.
    4. Amir, Rabah & Liu, Zhiwei & Tian, Jingwen, 2023. "Negative network effects and public policy in vaccine markets," Journal of Economic Behavior & Organization, Elsevier, vol. 216(C), pages 136-149.
    5. Chung, Sung Hoon & Kwon, Changhyun, 2016. "Integrated supply chain management for perishable products: Dynamics and oligopolistic competition perspectives with application to pharmaceuticals," International Journal of Production Economics, Elsevier, vol. 179(C), pages 117-129.
    6. Sarang Deo & Charles J. Corbett, 2009. "Cournot Competition Under Yield Uncertainty: The Case of the U.S. Influenza Vaccine Market," Manufacturing & Service Operations Management, INFORMS, vol. 11(4), pages 563-576, July.
    7. Jose Alcalde & Matthias Dahm, 2016. "Proportional payoffs in legislative bargaining with weighted voting: a characterization," Discussion Papers 2016-03, The Centre for Decision Research and Experimental Economics, School of Economics, University of Nottingham.
    8. Alcalde, José & Dahm, Matthias, 2019. "Dual sourcing with price discovery," Games and Economic Behavior, Elsevier, vol. 115(C), pages 225-246.
    9. Pedro Garcia-del-Barrio, 2017. "Pareto-improving income redistribution: expanding consumer access to the vaccines market," Economics of Governance, Springer, vol. 18(3), pages 275-313, August.

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