Will there be a COVID vaccine black market?

Supply and Demand are two of the most fundamental concepts of economics. The concept of demand means the quantity of goods that consumers are willing to buy at a given price, and the concept of supply means the quantity of goods that suppliers are willing to sell at a given price. [1]

Supply and Demand curve

If you plot Quantity on the X-axis and Price on the Y-Axis, the demand curve would be downward sloping as consumers would want to purchase higher quantities of goods for lower prices and the supply curve would be upward sloping as the suppliers would want to sell higher quantity of goods for higher prices. The point at which both the supply and demand curves intersect is called the Equilibrium, which means that this is the price where quantity demanded and supplied is equal.

Decrease in supply causes an increase in price

However changes in the market can disrupt this equilibrium where price will increase if all of a sudden the quantity of goods sold decreases for the same level of demand or if the quantity of goods required increases for the same level of supply.

Black Market

Exotic animals being traded. Source: Investopedia

If there is demand for certain goods and services which are restricted by the government, it is going to result in a Black Market where suppliers will figure out a way to provide goods and services to buyers willing to pay for the same. Transactions would be illegal and the money earned would have to be laundered to legitimize the transaction. Prima-facie, bad actors seem to benefit most from the black markets, but instances where supply of staple goods is restricted due to overregulation can also benefit the poor.

COVID Vaccines

If limited supply, and high demand is a good indicator for black markets, there is no more suitable candidate for it than the COVID vaccines. Governments will be the biggest buyers of the vaccines, and the supply would be highly regulated with preference given to frontline workers, at-risk patients and the elderly.

In a country like India, where you have to distribute vaccines on a massive scale, the government would have to build humongous supply chains to transport and ensure that the right people are vaccinated, not just once but twice. It’s obvious that a black market would be created, where the rich and powerful would be willing to pay exorbitant prices to cut lines and bribe the distributors. Advertisements of vaccine tourism are already flooding WhatsApp groups, where travel agencies are planning overseas trips for people to receive the Pfizer vaccine. [4]

Should there be a free market then?

The other alternative is to not regulate and let market forces determine price and quantity of vaccines to be sold. Maybe this can work in countries with similar income levels, but is not an option in India with enormous income disparities. The poor would never be able to afford vaccines with such high demand and that would lead to even further disparities.

What should governments do then?

Short answer is I don’t know. “DuckDuckGo” search tells me that the Indian government is planning to use something called an eVIN (electronic Vaccine Intelligence Network) to track shipments and keep stock of daily inventories to ensure that there is fair and equitable distribution. [5] I still suspect that the top 1% would figure out a way to get vaccines illegally, but even if that happens there seems to be enough supply for the frontline workers. The middle-class would probably be the last beneficiary, but there’s nothing anyone can do about it. Hope they continue taking precautions!

References:

[1] https://www.marketing91.com/supply-and-demand-curve/

[2] https://www.investopedia.com/articles/economics/12/mechanics-black-market.asp

[3] https://www.msn.com/en-in/money/news/coronavirus-vaccine-how-india-will-prevent-black-marketing-of-covid-19-cure/ar-BB19IeLG

[4] https://www.bloombergquint.com/china/covid-vaccine-rush-in-china-raises-fears-of-booming-black-market

[5] https://indianexpress.com/article/explained/what-is-evin-and-how-will-it-be-used-for-distributing-covid-19-vaccine-7065083/

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