Individuals’ Social Concern, Externalities and Voluntary Vaccination: Monopoly and First-Best Public Policy

Comparative statics of the monopoly equilibrium also shows that the net intensity of externality has a positive effect on the equilibrium market coverage in case the extent of heterogeneity in social concern is more than a threshold level, where the threshold level is positively associated with vaccine quality and direct health benefit of the vaccine. [...] Interestingly, the monopolist is more likely to develop a better quality vaccine in case the extent of heterogeneity in social concern is higher or the average level of social concern prevailing the the society is lower. [...] Now, an increase in the quality of the vaccine results in increase in magnitudes of each of these two effects, but the magnitude of the first effect increases more than proportionately than that of the second effect. [...] On the other hand, if there is sufficient heterogeneity in social concern and the marginal direct health benefit of vaccine quality is very large (more 23 than the total marginal effect of susceptibility on WTP of the most socially concerned individual), it is optimal for the monopolist to focus more on extracting the direct health benefit of the vaccine. [...] The direction of the effect of such a change in the distribution on the equilibrium vaccine coverage can be assessed by examining the sign ∗ of ∂θ.