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A Game Theoretic Analysis of Competition Between Vaccine and Drug Companies during Disease Contraction and Recovery

Author

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  • Kjell Hausken

    (Faculty of Science and Technology, University of Stavanger, Stavanger, Norway)

  • Mthuli Ncube

    (Said Business School, University of Oxford, Oxford, UK)

Abstract

Background Infectious diseases such as COVID-19 and HIV/AIDS are behaviorally challenging for persons, vaccine and drug companies, and donors. Methods In 3 linked games in which a disease may or may not be contracted, N persons choose risky or safe behavior (game 1). Two vaccine companies (game 2) and 2 drug companies (game 3) choose whether to develop vaccines and drugs. Each person chooses whether to buy 1 vaccine (if no disease contraction) or 1 drug (if disease contraction). A donor subsidizes vaccine and drug developments and purchases. Nature probabilistically chooses disease contraction, recovery versus death with and without each drug, and whether vaccines and drugs are developed successfully. COVID-19 data are used for parameter estimation. Results Each person chooses risky behavior if its utility outweighs safe behavior, accounting for nature’s probability of disease contraction which depends on how many are vaccinated. Each person buys a vaccine or drug if the companies produce them and if their utilities (accounting for side effects and virus mutation) outweigh the costs, which may be subsidized by a sponsor. Discussion Drug purchases depend on nature’s recovery probability exceeding the probability in the absence of a drug. Each company develops and produces a vaccine or drug if nature’s probability of successful development is high, if sufficiently many persons buy the vaccine or drug at a sales price that sufficiently exceeds the production price, and if the donor sponsors. Conclusion Accounting for all players’ interlinked decisions allowing 14 outcomes, which is challenging without a game theoretic analysis, the donor maximizes all persons’ expected utilities at the societal level to adjust how persons’ purchases and the companies’ development and production are subsidized. Highlights A game theoretic approach can help explain the production decisions of vaccine and drug companies, and the decisions of persons and a donor, impacted by Nature. In 3 linked games, N persons choose risky behavior if its utility outweighs safe behavior. Vaccine and drug companies develop vaccines and drugs sponsored by a donor if profitable, allowing 14 outcomes.

Suggested Citation

  • Kjell Hausken & Mthuli Ncube, 2022. "A Game Theoretic Analysis of Competition Between Vaccine and Drug Companies during Disease Contraction and Recovery," Medical Decision Making, , vol. 42(5), pages 571-586, July.
    • Handle: RePEc:sae:medema:v:42:y:2022:i:5:p:571-586
    DOI: 10.1177/0272989X211053563
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    References listed on IDEAS

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    1. Michèle Belot & Syngjoo Choi & Egon Tripodi & Eline van den Broek-Altenburg & Julian C. Jamison & Nicholas W. Papageorge, 2021. "Unequal consequences of Covid 19: representative evidence from six countries," Review of Economics of the Household, Springer, vol. 19(3), pages 769-783, September.
    2. Michael Kremer & Christopher M. Snyder, 2003. "Why Are Drugs More Profitable Than Vaccines?," NBER Working Papers 9833, National Bureau of Economic Research, Inc.
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