Government regulation of emergency supplies under the epidemic crisis

Abstract

This paper constructs a multi-oligopoly model of emergency supplies and analyses the market equilibrium results under normal conditions and epidemic conditions. The impacts of the degree of change in market demand, externalities, the material cost of emergency supplies and government regulation on the equilibrium results, especially on the prices of emergency supplies, are discussed. The results show that an increase in material cost will lead to low output and social welfare and a high price, under either normal conditions or epidemic conditions. Moreover, under epidemic conditions, the degree of change in market demand, externalities, material cost and the presence and mode of government regulation all have multiple and complex influences on the equilibrium results. Under epidemic conditions, both government output and price regulation can increase the supply of emergency supplies. In addition, when market demand changes drastically, consumer surplus and social welfare can be enhanced by the implementation of regulations. Particularly, price regulation is more effective when there is a high material cost.