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

Amitrajeet Batabyal and Hamid Beladi

MPRA Paper from University Library of Munich, Germany

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.

Keywords: Bertrand Duopoly; City; Innovation; R&D; Region; Vaccine (search for similar items in EconPapers)
JEL-codes: L13 O32 R11 (search for similar items in EconPapers)
Date: 2022-01-09, Revised 2022-06-28
New Economics Papers: this item is included in nep-com, nep-gth and nep-sbm
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