Incentives for accelerating the production of Covid-19 vaccines in the presence of adjustment costs

Claudius Gros and Daniel Gros

Papers from arXiv.org

Abstract: Delays in the availability of vaccines are costly as the pandemic continues. However, in the presence of adjustment costs firms have an incentive to increase production capacity only gradually. The existing contracts specify only a fixed quantity to be supplied over a certain period and thus provide no incentive for an accelerated buildup in capacity. A high price does not change this. The optimal contract would specify a decreasing price schedule over time which can replicate the social optimum.

Date: 2021-02
New Economics Papers: this item is included in nep-cta
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Working Paper: Incentives for Accelerating the Production of Covid-19 Vaccines in the Presence of Adjustment Costs (2021)
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