Working Paper
Incentives for Accelerating the Production of Covid-19 Vaccines in the Presence of Adjustment Costs
Claudius Gros, Daniel Gros
ifo Institute, Munich, 2021
EconPol Policy Brief 33
ifo Institute, Munich, 2021
EconPol Policy Brief 33
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.