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Market structure and communicable diseases

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Author Info
Stéphane Mechoulan

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Abstract

Communicable diseases pose a formidable challenge for public policy. Using numerical simulations, we show under which scenarios a monopolist's price and prevalence paths converge to a non-zero steady state. In contrast, a planner typically eradicates the disease. If eradication is impossible, the planner subsidizes treatments as long as the prevalence can be controlled. Drug resistance exacerbates the welfare difference between monopoly and first best outcomes. Nevertheless, because the negative externalities from resistance compete with the positive externalities of treatment, a mixed competition/monopoly regime may perform better than competition alone. This result has important implications for the design of many drug patents.

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File URL: http://economics.ca/cgi/xms?jab=v40n2/CJEv40n2p0468.pdf
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Publisher Info
Article provided by Canadian Economics Association in its journal Canadian Journal of Economics.

Volume (Year): 40 (2007)
Issue (Month): 2 (May)
Pages: 468-492
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Handle: RePEc:cje:issued:v:40:y:2007:i:2:p:468-492

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Find related papers by JEL classification:
I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:

  1. Gersovitz, Mark & Hammer, Jeffrey S., 2005. "Tax/subsidy policies toward vector-borne infectious diseases," Journal of Public Economics, Elsevier, vol. 89(4), pages 647-674, April. [Downloadable!] (restricted)
  2. Daily, Gretchen C. & Ehrlich, Paul R., 1996. "Impacts of development and global change on the epidemiological environment," Environment and Development Economics, Cambridge University Press, vol. 1(03), pages 311-346, July. [Downloadable!]
  3. Tomas Philipson, 1999. "Economic Epidemiology and Infectious Diseases," NBER Working Papers 7037, National Bureau of Economic Research, Inc. [Downloadable!] (restricted)
    Other versions:
  4. Kessing, Sebastian G. & Nuscheler, Robert, 2006. "Monopoly pricing with negative network effects: The case of vaccines," European Economic Review, Elsevier, vol. 50(4), pages 1061-1069, May. [Downloadable!] (restricted)
  5. Brown, Gardner & Layton, David F., 1996. "Resistance economics: social cost and the evolution of antibiotic resistance," Environment and Development Economics, Cambridge University Press, vol. 1(03), pages 349-355, July. [Downloadable!]
  6. Brito, Dagobert L. & Sheshinski, Eytan & Intriligator, Michael D., 1991. "Externalities and compulsary vaccinations," Journal of Public Economics, Elsevier, vol. 45(1), pages 69-90, June. [Downloadable!] (restricted)
  7. Mark Gersovitz & Jeffrey S. Hammer, 2003. "Infectious Diseases, Public Policy, and the Marriage of Economics and Epidemiology," World Bank Research Observer, Oxford University Press, vol. 18(2), pages 129-157.
  8. Scott Barrett, 2003. "Global Disease Eradication," Journal of the European Economic Association, MIT Press, vol. 1(2-3), pages 591-600, 04/05. [Downloadable!] (restricted)
  9. John B. Horowitz & H. Brian Moehring, 2004. "How property rights and patents affect antibiotic resistance," Health Economics, John Wiley & Sons, Ltd., vol. 13(6), pages 575-583. [Downloadable!]
  10. Michael Hoel & Scott Barrett, 2004. "Optimal Disease Eradication," Working Papers 2004.50, Fondazione Eni Enrico Mattei. [Downloadable!]
  11. Steven Marc Goldman & James Lightwood, 2002. "Cost Optimization in the SIS Model of Infectious Disease with Treatment," The B.E. Journal of Economic Analysis & Policy, Berkeley Electronic Press, vol. 0(1). [Downloadable!]
  12. Francis, Peter J., 1997. "Dynamic epidemiology and the market for vaccinations," Journal of Public Economics, Elsevier, vol. 63(3), pages 383-406, February. [Downloadable!] (restricted)
  13. Stephen P. A. Brown & William C. Gruben, 1997. "Intellectual property rights and product effectiveness," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Q IV, pages 15-20. [Downloadable!]
  14. Alistair Munro, 1997. "Economics and biological evolution," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 9(4), pages 429-449, June. [Downloadable!] (restricted)
  15. Mark Gersovitz & Jeffrey S. Hammer, 2004. "The Economical Control of Infectious Diseases," Economic Journal, Royal Economic Society, vol. 114(492), pages 1-27, 01. [Downloadable!] (restricted)
    Other versions:
  16. Geoffard, Pierre-Yves & Philipson, Tomas, 1997. "Disease Eradication: Private versus Public Vaccination," American Economic Review, American Economic Association, vol. 87(1), pages 222-30, March. [Downloadable!] (restricted)
Full references

Cited by:
(explanations, Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.)

  1. Na Hao & Gervan Fearon, 2009. "Government Funding Policy Towards Communicable Diseases," Atlantic Economic Journal, International Atlantic Economic Society, vol. 37(2), pages 121-134, June. [Downloadable!] (restricted)
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