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

Batabyal, Amitrajeet and Beladi, Hamid (2022): City and Regional Demand for Vaccines Whose Supply Arises from Competition in a Bertrand Duopoly.

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: Bertrand Duopoly, City, Innovation, R&D, Region, Vaccine
• Subjects: L - Industrial Organization > L1 - Market Structure, Firm Strategy, and Market Performance > L13 - Oligopoly and Other Imperfect Markets; O - Economic Development, Innovation, Technological Change, and Growth > O3 - Innovation ; Research and Development ; Technological Change ; Intellectual Property Rights > O32 - Management of Technological Innovation and R&D; R - Urban, Rural, Regional, Real Estate, and Transportation Economics > R1 - General Regional Economics > R11 - Regional Economic Activity: Growth, Development, Environmental Issues, and Changes

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