Date Added: Jul 2011
In US vaccine markets, competing producers with high fixed, sunk costs face relatively concentrated demand. The resulting price and quality competition leads to the exit of all but one or very few producers per vaccine. The authors' empirical analysis of exits from US vaccine markets supports the hypothesis that high fixed costs and both price and quality competition contribute to vaccine exits. They find no evidence that government purchasing has significant effects, possibly because government purchase tends to increase volume but lower price, with offsetting effects. Evidence from the flu vaccine market confirms that government purchasing is not a necessary condition for exits and the existence of few suppliers per vaccine in the US.