Answer any FOUR of the following questions. Each question is worth a total of 12.5 marks. If
more than four questions are answered, marks will be awarded for the first four answers only.
QUESTION 1
At the beginning of the flu season, Australians can purchase flu vaccinations from many
different immunisation providers such as pharmacies, doctors’ practices and community
health centres. A recent scientific study showed that getting a flu jab reduces both the chance
of getting COVID-19 and COVID-19 symptoms. This welcome news has been widely reported
in the newspapers. Examine the likely consequences in one or two related markets of your
choice.
QUESTION 2
Governments generally want people to get immunised against the flu and other diseases such
as COVID-19. Nonetheless many people refuse to take the vaccination jab, because they
overestimate the likelihood of side effects, because they are complacent about getting
infected. They also might not care or understand that their immunity protects others. Use the
theories of market failure and government intervention to analyse the motives of
government, the anti-vax phenomenon and their consequences. What, if anything should
government do to make more people get vaccinated? What would be the problems with such
interventions?
QUESTION 3
When COVID-19 stated spreading across the world, the race was on to develop vaccines as
quickly as possible. Such research & development has a high fixed cost and can only be
undertaken in industries with high market concentration where firms have significant
monopoly power, like the pharmaceutical industry. Examine this industry using the theory
and models of industry structure. Should government be worried about any aspect of how an
industry with this market structure will perform?
QUESTION 4
Pfizer is one of the world’s largest pharmaceutical companies. Developing its COVID-19
vaccine is a costly, uncertain and complex process. This company would need to consider
which parts of the vertical chain to outsource and which to conduct inhouse. Using the theory
of the optimal boundary of the firm, discuss Pfizer’s make-or-buy decision for developing and
producing its COVID vaccine. What stages of the vertical chain should Pfizer consider
conducting inhouse, and which should be outsourced? Provide reasons for your findings.
QUESTION 5
Consider the following hypothetical case. Only Pfizer and a competitor, Astra-Zeneca, have
the ability to develop a COVID-19 vaccine. Both have access to the same two promising
vaccine technologies, but each company must choose one to invest in. While each firm
could develop a vaccine on its own, the problem is that the fixed cost of production and risk
are very high. They are therefore considering coordinating their actions through a strategic
alliance where they join forces and share cost and revenue equally. Analyse the interaction
between the two firms using game theory. Present a payoff matrix to model the situation
and analyse it for Nash equilibrium. What can either of these firms do to make their best,
most-preferred outcome more likely?