Internalising an externality for a free merit good

As you imply, a vaccine (if safe and effective) is a merit good because receipt of the vaccine by an individual has benefits to society as well as benefits to the individual. In other words there is a positive consumption externality. Therefore, if some individuals are declining to accept the vaccine when offered it, some sort of policy response to increase uptake may be appropriate. However, the appropriate policy response must have regard both to the reasons why individuals are declining the vaccine and to possible unintended adverse consequences of the policy. A subsidy attempting to internalize the externality is not the only possible approach.

The paper by Goodkin-Gold et al referred to by 1muflon1 makes only towards the end the very important point that individuals differ: what it terms "consumer heterogeneity" (p 42). One aspect of this is differences, eg because of age, in the benefit individuals receive from the vaccine: "heterogeneity in benefits" (pp 43-44). I could not find any consideration in the paper of misinformation as such, but there is brief mention of "anti-vax sentiment" which is given as one example of personal cost associated with receiving a vaccine even if provided free, other such costs being travel difficulties and low tolerance for pain (p 45). The paper then points out that a uniform subsidy to everyone, to encourage individuals with high personal costs to accept the vaccine might a) be effective in increasing uptake of the vaccine, but b) involve unacceptably high financial cost (what it terms "unmodeled frictions" (p 45)). It goes on to suggest that, in view of (b), subsidies targeted at particular groups might be a better policy.

A possible criticism of the paper is its subsuming "anti-vax sentiment" within the general category of personal cost. One might argue that monetary payment may not be effective in inducing individuals to accept the vaccine if they have a strongly-held view, however misinformed, that the vaccine is unsafe. An information campaign to counter misinformation might be a more effective use of public funds.

If a policy of targeted subsidies were adopted, its effectiveness would be likely to depend very much on circumstances. The paper rightly points out that targeting can yield a net benefit to society even if many of the individuals in the target group would have accepted the vaccine anyway (p 45). But it is also the case that targeting criteria, especially if the target is the misinformed, could be difficult to define and might raise issues of fairness. In a worst case, targeted subsidies could induce individuals who would otherwise have been vaccinated to delay their vaccination in the hope of receiving a payment.