Herd immunity Each vaccination protects not only the vaccine- recipient but also neighbors as well Even unvaccinated people benefit when their neighbors,friends,coworkers,and family become immune through vaccination Known as herd immunity Herd immunity is a classic positive externality: the social gain from each vaccinationis greater than the private gain from that vaccination. Bhattacharya,Hyde and Tu-HealthEconomics
Bhattacharya, Hyde and Tu – Health Economics Herd immunity Each vaccination protects not only the vaccinerecipient but also neighbors as well Even unvaccinated people benefit when their neighbors, friends, coworkers, and family become immune through vaccination Known as herd immunity Herd immunity is a classic positive externality: the social gain from each vaccination is greater than the private gain from that vaccination
Herd immunity When deciding whether to get vaccinated, people balance the private gains from vaccination-immunity from the disease- against the private costs But a person considering vaccination ignores the social benefits of herd immunity Since social benefits>private benefits,a private market produces fewer vaccinations than socially optimal Bhattacharya,Hyde and Tu-HealthEconomics
Bhattacharya, Hyde and Tu – Health Economics Herd immunity When deciding whether to get vaccinated, people balance the private gains from vaccination – immunity from the disease – against the private costs But a person considering vaccination ignores the social benefits of herd immunity Since social benefits > private benefits, a private market produces fewer vaccinations than socially optimal
The market for flu vaccinations Private demand curve D reflects the private decisions of people in the market about whether they want to vaccinate at price P These decisions reflect only private costs and benefits and not social costs and benefits Herd immunity benefits are ignored Bhattacharya,Hyde and Tu-HealthEconomics
Bhattacharya, Hyde and Tu – Health Economics The market for flu vaccinations Private demand curve D reflects the private decisions of people in the market about whether they want to vaccinate at price P These decisions reflect only private costs and benefits and not social costs and benefits Herd immunity benefits are ignored
The market for flu vaccinations Social demand curve Dsoc is greater than the private demand Curve Dpriv Captures positive B externality of herd P S immunity Dsoc Dpriv Socially efficient equilibrium higher Q than private equilibrium Bhattacharya,Hyde and Tu-HealthEconomics
Bhattacharya, Hyde and Tu – Health Economics The market for flu vaccinations Social demand curve Dsoc is greater than the private demand curve Dpriv Captures positive externality of herd immunity Socially efficient equilibrium higher than private equilibrium
The market for flu vaccinations social surplus social loss Note:Size of the social loss (the area of B) depends on the price elasticity of the demand 3 S curve. Dsoc .Dpriv Q'soc Q Bhattacharya,Hyde and Tu-HealthEconomics
Bhattacharya, Hyde and Tu – Health Economics The market for flu vaccinations Note: Size of the social loss (the area of B) depends on the price elasticity of the demand curve