{"id":103384,"date":"2021-04-26T10:08:01","date_gmt":"2021-04-26T04:38:01","guid":{"rendered":"https:\/\/blog.forumias.com\/?p=103384"},"modified":"2021-04-26T20:45:14","modified_gmt":"2021-04-26T15:15:14","slug":"issues-in-pricing-mechanism-of-covid-19-vaccines","status":"publish","type":"post","link":"https:\/\/forumias.com\/blog\/issues-in-pricing-mechanism-of-covid-19-vaccines\/","title":{"rendered":"Issues in Pricing Mechanism of Covid-19 vaccines\u00a0"},"content":{"rendered":"\n<p><b>Synopsis: <\/b><span style=\"font-weight: 400;\">A single price for Covid-19 vaccines will fuel production and ensure efficient vaccination.<\/span><\/p>\n<h5><b>Introduction\u00a0<\/b><\/h5>\n<p><span style=\"font-weight: 400;\">Economists suggest market-based solutions for covid-19 vaccines due to their claimed efficiency. The market depends on the price mechanism and the forces of supply and demand.\u00a0<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Increased competition pushes up supply and pushes down prices. This combination leads to an efficient allocation of scarce resources.\u00a0<\/span><\/li>\n<li>However, the Market mechanism works well, when there is no <strong>externality<\/strong> is associated with the good.\n<ul>\n<li>An externality occurs when the production or consumption of a good results in the cost or benefit to an unrelated third party.<\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Vaccines have a positive externality because their use benefits the vaccinated person and also reduces transmission t0 others.<\/span><\/li>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">Almost everyone ignores the full set of benefits from goods with positive\/negative externalities. Thus, the market isn\u2019t the most suitable tool for the distribution of such goods.\u00a0<\/span><\/li>\n<\/ul>\n<h5><b>How the new Vaccine policy could result in vaccine failure?<\/b><\/h5>\n<p><span style=\"font-weight: 400; color: #000000;\">The government is not considering the large positive externality attached to vaccination. This may result in inefficiency in vaccine delivery.<\/span><\/p>\n<ul>\n<li><b>Firstly,<\/b><span style=\"font-weight: 400;\"> manufacturers have to declare their prices in advance for their 50 percent supply to the open market. However, there <\/span><b>is no limit on the retail price<\/b><span style=\"font-weight: 400;\"> they would charge. This might result in <\/span><b>vaccine inequality.\u00a0<\/b><\/li>\n<li><b>Secondly, low-income people are naturally prone to infect others<\/b><span style=\"font-weight: 400;\"> because of their nature of work. Low income has a higher negative externality and thus vaccinating them first is more beneficial to society. However, these <\/span><b>people cannot ordinarily afford the vaccine.\u00a0<\/b><\/li>\n<li><b>Lastly,<\/b><span style=\"font-weight: 400;\"> when the market is allowed to deliver vaccines, richer people will be prepared to pay more and <\/span><b>will have better access.\u00a0<\/b>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">The market will <\/span><b>ignore those with lower purchasing power<\/b><span style=\"font-weight: 400;\">, in spite of them having a higher chance of spreading the disease. The bigger the income difference between the two sections, the larger will be the degree of market failure.<\/span><\/li>\n<\/ul>\n<\/li>\n<\/ul>\n<h5><b>What is the solution?<\/b><\/h5>\n<p><span style=\"font-weight: 400;\">The new policy could lead to possible efficiency loss. The effective solution for addressing market failure is that a <\/span><b>single price can be paid to vaccine makers for all the doses that they supply<\/b><span style=\"font-weight: 400;\">. The price should be high enough to fuel them to rapidly increase production.\u00a0<\/span><\/p>\n<ul>\n<li style=\"font-weight: 400;\"><b>The government will have to pay the vaccine maker<\/b><span style=\"font-weight: 400;\"> or the hospital managing the dose. The suggested solution is similar to the fertiliser subsidy, which is now paid to companies only after actual sales to farmers.\u00a0<\/span>\n<ul>\n<li style=\"font-weight: 400;\"><span style=\"font-weight: 400;\">A subsidy is not paid on any bag unless the purchase, along with the farmer\u2019s biometric authentication and other details, is captured on a point-of-sale machine at the retail outlet linked to a central server.<\/span><\/li>\n<\/ul>\n<\/li>\n<li style=\"font-weight: 400;\"><b>The vaccine producer gets the full market price<\/b><span style=\"font-weight: 400;\"><span style=\"font-weight: 400;\"> after a person gets vaccinated. It will also ensure no deviation or grey market. It is in our own interest to get not just ourselves, but also others vaccinated.<\/span><\/span><b>Source: <\/b><a href=\"https:\/\/indianexpress.com\/article\/opinion\/columns\/covid-19-vaccine-india-price-7285387\/\">click here<\/a><\/li>\n<\/ul>\n","protected":false},"excerpt":{"rendered":"<p>Synopsis: A single price for Covid-19 vaccines will fuel production and ensure efficient vaccination. Introduction\u00a0 Economists suggest market-based solutions for covid-19 vaccines due to their claimed efficiency. The market depends on the price mechanism and the forces of supply and demand.\u00a0 Increased competition pushes up supply and pushes down prices. This combination leads to an&hellip; <a class=\"more-link\" href=\"https:\/\/forumias.com\/blog\/issues-in-pricing-mechanism-of-covid-19-vaccines\/\">Continue reading <span class=\"screen-reader-text\">Issues in Pricing Mechanism of Covid-19 vaccines\u00a0<\/span><\/a><\/p>\n","protected":false},"author":10315,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"jetpack_post_was_ever_published":false,"footnotes":""},"categories":[1230,9],"tags":[1289,1472],"class_list":["post-103384","post","type-post","status-publish","format-standard","hentry","category-9-pm-daily-articles","category-public","tag-soc_0","tag-vaccine_related_issues","entry"],"jetpack_featured_media_url":"","views":{"total":0,"cached_at":"","cached_date":1704824529},"jetpack_sharing_enabled":true,"_links":{"self":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/103384","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/users\/10315"}],"replies":[{"embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/comments?post=103384"}],"version-history":[{"count":0,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/posts\/103384\/revisions"}],"wp:attachment":[{"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/media?parent=103384"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/categories?post=103384"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/forumias.com\/blog\/wp-json\/wp\/v2\/tags?post=103384"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}