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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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Citations

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Cited by:
  1. Markus Herrmann, 2009. "Monopoly Pricing of an Antibiotic Subject to Bacterial Resistance," Cahiers de recherche 0946, CIRPEE.
  2. 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.
  3. 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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