Vaccine market coordination using subsidy

Abstract

Prevention of infectious diseases is an important concern for managing public health. Although vaccines are the most effective means for preventing infectious diseases, the existence of a negative network externality often makes it difficult for vaccine coverage to reach a level that is socially optimal. In this research, we consider how a subsidy program can induce a socially optimal vaccine coverage. We consider an oligopoly market with identical vaccine producers and derive a subsidy that leads to a socially efficient level of coverage. We also derive a tax-subsidy combination that is revenue neutral, but achieves the same effect. Overall, our results provide useful insights for governments and policy makers with respect to an important issue related to public health.