When the Big One Came: A Natural Experiment on Demand Shock and Market Structure in India’s Influenza Vaccine Markets

41 Pages Posted: 29 May 2018 Last revised: 26 Sep 2018

See all articles by Arzi Adbi

Arzi Adbi

National University of Singapore

Chirantan Chatterjee

Indian Institute of Management, Ahmedabad

Matej Drev

Georgia Institute of Technology

Anant Mishra

University of Minnesota - Twin Cities - Carlson School of Management

Date Written: September 26, 2018

Abstract

This paper examines the relationship between exogenous demand shock and market structure in India’s influenza vaccine markets. Using a novel dataset of detailed purchasing information for vaccines in India, and exploiting the 2009-10 global H1N1 pandemic as an exogenous demand shock, we provide evidence of heterogeneous responses to the shock by domestic and multinational vaccine manufacturers in the influenza vaccine market relative to our control group of all other vaccine markets. We find that such a shock results in a reversal of the market structure for influenza vaccines in India, with a decline in the market share of multinational vaccine manufacturers and significant gains in the market share of domestic vaccine manufacturers. This reversal of the market structure is driven by increased efforts at new product introduction among domestic vaccine manufacturers, the effects of which persist even after the pandemic has ended. Our results remain robust to the use of alternative controls, synthetic control method, coarsened exact matching method, and other relevant estimation methodologies. These results provide new evidence on the role of a pandemic-induced demand shock in the context of an emerging economy by creating differential incentives for domestic and multinational vaccine manufacturers to bring new products to market. We also conduct additional analysis to explore the impact of targeted policy instruments on the new product introduction efforts of domestic vaccine manufacturers. Finally, we discuss the implications of our findings and offer insights into the role of policy on pandemic preparedness in emerging markets facing adverse welfare effects from pandemics.

Keywords: Demand Shocks, Influenza, New Product Development, Emerging Economy, Public Policy, Natural Experiment

Suggested Citation

Adbi, Arzi and Chatterjee, Chirantan and Drev, Matej and Mishra, Anant, When the Big One Came: A Natural Experiment on Demand Shock and Market Structure in India’s Influenza Vaccine Markets (September 26, 2018). INSEAD Working Paper No. 2018/45/STR, Available at SSRN: https://ssrn.com/abstract=3186456 or http://dx.doi.org/10.2139/ssrn.3186456

Arzi Adbi (Contact Author)

National University of Singapore ( email )

15 Kent Ridge Drive
Mochtar Riady Building
Singapore, Singapore 119245
Singapore

Chirantan Chatterjee

Indian Institute of Management, Ahmedabad ( email )

Vastrapur
Ahmedabad, Gujarat 380 015
India

HOME PAGE: http://https://www.iima.ac.in/web/faculty/faculty-profiles/chirantan-chatterjee

Matej Drev

Georgia Institute of Technology ( email )

Atlanta, GA 30332
United States

Anant Mishra

University of Minnesota - Twin Cities - Carlson School of Management ( email )

19th Avenue South
Minneapolis, MN 55455
United States

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