Optimal vaccine subsidies for endemic diseases

In Goodkin-Gold et al. (2021), we analyzed optimal subsidies for a vaccine against an epidemic outbreak like Covid-19. This companion paper alters the underlying epidemiological model to suit endemic diseases requiring continuous vaccination of new cohorts—also suiting an epidemic like Covid-19 if, following Gans (2020), one assumes peaks are leveled by social distancing. We obtain qualitatively similar results: across market structures ranging from perfect competition to monopoly, the subsidy needed to induce first-best vaccination coverage on the private market is highest for moderately infectious diseases, which invite the most free riding; extremely infectious diseases drive more consumers to become vaccinated, attenuating externalities. Stylized calibrations to HIV, among other diseases, suggest that first-best subsidies can be exorbitantly high when suppliers have market power, rationalizing alternative policies observed in practice such as bulk purchases negotiated by the government on behalf of the consumers