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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 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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File URL: http://www.chass.utoronto.ca/~mechoula/CJErevisedwithpics.pdf
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Publisher 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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Related research
Keywords: communicable disease; resistance; epidemiology; patent;

Other versions of this item:

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

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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.:
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    Other versions:
  2. 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!]
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  5. repec:bep:eaptop:v:2:y:2002:i:1:p:1007-1007 is not listed on IDEAS
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    Other versions:
  10. 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)
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  13. 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)
  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. [Downloadable!]
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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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