But how does that support the theory that manufacturers are keeping production down to hold profits up? The difference between, say, $2 and $5 in a poor country is what's going to motivate them to restrict production, at a time when they can sell it in rich countries for $150? What sense does that make? If it's modestly profitable at $2 then it's very very profitable at $150. Of course they're making the stuff as fast as they can.
If you cannot comprehend why $5 per unit earns them more than $2 per unit, then I cannot help you.
Are you trying to refute a specific argument about a specific situation by appealing to a generic economic theory that's based on generic firms selling generic widgets?
A generic firm chooses a low level of production at $5 a widget rather than a high level of production at $2 a widget because it can't choose a high level of production at $5 a widget for customers who'll pay $5 and $2 a widget for ones who won't pay $5, even though that would be even more profitable than a low level of production at $5 a widget. The firm can't choose that, because if it tries it, the customers getting widgets for $2 will just buy extra widgets and sell them to the $5 customers for $3. That's why generic widget-selling firms charge the same price to everyone. It's the transferability that makes single prices profit-maximizing. When customers are stopped from trading the product among themselves firms start using dual-pricing structures, because that makes them more money. It's why movie theaters have lower ticket prices for children and seniors.
Vaccine injections are non-transferable. Vaccine manufacturers use dual- or multiple- pricing systems. It is therefore not necessary for a firm to restrict production in order to get $5 per unit instead of $2 per unit in the third world. There is more demand in the third world at $2 than at $5, true; but if a manufacturer chooses not to restrict production, and consequently has extra vaccine on hand that it can't sell in the third world for $5, it doesn't need to sell it for $2 in the third world and consequently reduce its profit. It can simply go on charging $5 in the third world and sell all that left-over vaccine in the first world for $150 a dose. The fact that $5 per unit earns them more than $2 per unit in the third world therefore gives the manufacturer no financial incentive to restrict production.
Perhaps the $5 is a nod to public relations and an attempt to reduce regulatory pressure.
Very likely.
Apparently you know more about the costs of reaching economies of scale than most manufacturers – who strive to reach it.
Huh? According to your explanation of ZiprHead's argument, the drug companies aren't striving to reach it. I'm not disputing their expertise as to what will maximize their profits; I'm relying on it.
Reaching economies of scale in competitive markets helps firms to maximize profits. Reaching economies of scale in non-competitive markets that face a downward sloping demand curve usually does not maximize profits.
Yes, exactly. The fact that most manufacturers strive to reach it is neither here nor there, as far as the present case is concerned.
... the point is that "Do more work for us and be paid less" is cruddy employee motivation. So if the authors are aiming for an outcome where economies of scale permit enough for everyone but profits go down, then they need to persuade governments to build their own vaccine factories.
Or regulate the vaccine producers.
Well, in the first place, regulation tends to be a lot more effective at getting a regulated firm
not to do something, than at getting it to
do something. Reaching economies of scale takes investment. What are regulators going to do, enact a regulation requiring a manufacturer to invest more in production facilities and requiring the public to subscribe to their public stock offering?
And in the second place, the WHO and Gavi and so forth have no regulatory powers. So if the authors want to get GSK to sell more vaccine in the third world at lower prices by regulation, instead of getting somebody else to make vaccine, they need to persuade the
British government to enact the regulation. I.e., they need to persuade the British government to order GSK to deliver its product to third world girls instead of to
British boys. Why on earth would the British government want to do that? Why on earth would the British public want to vote for politicians who'd do that?