Cournot Competition Under Yield Uncertainty: The Case of the U.S. Influenza Vaccine Market

Deo, S and Corbett, C (2009) Cournot Competition Under Yield Uncertainty: The Case of the U.S. Influenza Vaccine Market. Manufacturing & Service Operations Management, 11 (4). pp. 563-576.

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Abstract

This paper is inspired by the recurring mismatch between demand and supply in the U.S. influenza vaccine market. Economic theory predicts that an oligopolistic market with unregulated but costly entry will experience excess entry and oversupply, not the undersupply observed in the market for influenza vaccine in recent years. In this paper, we examine the interaction between yield uncertainty, a key characteristic of many production processes, including that for influenza vaccine, and firms' strategic behavior. We find that yield uncertainty can contribute to a high degree of concentration in an industry and a reduction in the industry output and the expected consumer surplus in equilibrium. We use parameter values loosely based on the U.S. influenza vaccine market to numerically illustrate the impact of yield uncertainty.

Affiliation: Kellogg School of Management, Northwestern University, USA
ISB Creators:
ISB CreatorsORCiD
Deo, SUNSPECIFIED
Item Type: Article
Subjects: Marketing
Depositing User: LRC ISB
Date Deposited: 16 Jun 2015 06:03
Last Modified: 16 Jun 2015 13:40
URI: http://eprints.exchange.isb.edu/id/eprint/412
Publisher URL: http://dx.doi.org/10.1287/msom.1080.0242
Publisher OA policy: http://www.sherpa.ac.uk/romeo/issn/1523-4614/
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