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Market Structure and Communicable Diseases

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  • Stéphane Mechoulan

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 nonzero 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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Bibliographic Info

Paper provided by University of Toronto, Department of Economics in its series Working Papers with number tecipa-241.

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Length: 37 pages
Date of creation: 27 Jun 2005
Date of revision:
Handle: RePEc:tor:tecipa:tecipa-241

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Keywords: communicable disease; resistance; epidemiology; patent;

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References

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  5. 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.
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  7. Philipson, Tomas, 2000. "Economic epidemiology and infectious diseases," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 33, pages 1761-1799 Elsevier.
  8. Barrett, Scott & Hoel, Michael, 2007. "Optimal disease eradication," Environment and Development Economics, Cambridge University Press, vol. 12(05), pages 627-652, October.
  9. 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.
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  11. Francis, Peter J., 1997. "Dynamic epidemiology and the market for vaccinations," Journal of Public Economics, Elsevier, vol. 63(3), pages 383-406, February.
  12. Mark Gersovitz & Jeffrey S. Hammer, 2003. "Infectious Diseases, Public Policy, and the Marriage of Economics and Epidemiology," World Bank Research Observer, World Bank Group, vol. 18(2), pages 129-157.
  13. Kessing, Sebastian & Nuscheler, Robert, 2003. "Monopoly pricing with negative network effects: the case of vaccines," Discussion Papers, Research Unit: Market Processes and Governance SP II 2003-06, Social Science Research Center Berlin (WZB).
  14. 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.
  15. Scott Barrett, 2003. "Global Disease Eradication," Journal of the European Economic Association, MIT Press, vol. 1(2-3), pages 591-600, 04/05.
  16. 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.
  17. Baumol, William J., 1996. "Antibiotics overuse and other threats," Environment and Development Economics, Cambridge University Press, vol. 1(03), pages 346-349, July.
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Cited by:
  1. Herrmann, Markus & Nkuiya, Bruno & Dussault, Anne-Renée, 2013. "Innovation and antibiotic use within antibiotic classes: Market incentives and economic instruments," Resource and Energy Economics, Elsevier, vol. 35(4), pages 582-598.
  2. Herrmann, Markus & Nkuiya, Bruno & Dussault, Anne-Renée, 2013. "Innovation and Antibiotic Use within Antibiotic Classes: Market Incentives and Economic Instruments," Working Papers 149731, University of Laval, Center for Research on the Economics of the Environment, Agri-food, Transports and Energy (CREATE).
  3. 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.
  4. Markus Herrmann, 2009. "Monopoly Pricing of an Antibiotic Subject to Bacterial Resistance," Cahiers de recherche 0946, CIRPEE.
  5. Herrmann, Markus, 2010. "Monopoly pricing of an antibiotic subject to bacterial resistance," Journal of Health Economics, Elsevier, vol. 29(1), pages 137-150, January.

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