Which Diseases Generate the Largest Epidemiological Externalities?

The existence of positive epidemiological externalities from vaccination are widely accepted and motivate a variety of public policies, but we lack a sense of what affects the relative magnitude of these externalities across diseases. We analyze vaccine externalities in an integrated economic and epidemiological model in which producers have market power. A result of our model is that the marginal externality from vaccination is non-monotonic in disease transmissibility, and peaks when the transmissibility rate is very close to the death rate in the population. We show that the minimum optimal vaccination subsidy is also non-monotonic in disease transmissibility, which in turn characterizes the diseases for which the potential welfare gains from vaccination subsidies would be largest. We extend our model to consider other market structures including perfect competition and Cournot competition.