Monopoly pricing of an antibiotic subject to bacterial resistance
We develop a dynamic bio-economic model of bacterial resistance and disease transmission in which we characterize the pricing policy of a monopolist who is protected by a patent. After expiration, the monopolist behaves competitively in a generic industry having open access to the common pool of antibiotic efficacy and infection. The monopolist manages endogenously the levels of antibiotic efficacy as well as the infected population, which represent quality and market size respectively and achieves, at least temporarily, higher such levels than a hypothetically myopic monopolist who does not take into account the dynamic externalities. The pricing policy and the biological system is characterized by the turnpike property. Before the patent vanishes, the monopolist behaves more and more myopically, leading to a continuous decrease in the price of the antibiotic. Once the generic industry takes over, a discontinuous fall in price occurs. Whether a prolongation of the patent is socially desirable depends on the relative levels of antibiotic efficacy and infection.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
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.:
- GAUDET, Gérard & HERRMANN, Markus, 2007.
"The Economic Dynamics of Antibiotic Efficacy under Open Access,"
Cahiers de recherche
04-2007, Centre interuniversitaire de recherche en économie quantitative, CIREQ.
- Herrmann, Markus & Gaudet, Gérard, 2009. "The economic dynamics of antibiotic efficacy under open access," Journal of Environmental Economics and Management, Elsevier, vol. 57(3), pages 334-350, May.
- GAUDET, Gérard & HERRMANN, Markus, 2007. "The Economic Dynamics of Antibiotic Efficacy under Open Access," Cahiers de recherche 2007-04, Universite de Montreal, Departement de sciences economiques.
- Gardner Brown & Ramanan Laxminarayan, 1998.
"Economics of Antibiotic Resistance,"
Discussion Papers in Economics at the University of Washington
0060, Department of Economics at the University of Washington.
- Fischer, Carolyn & Laxminarayan, Ramanan, 2005. "Sequential development and exploitation of an exhaustible resource: do monopoly rights promote conservation?," Journal of Environmental Economics and Management, Elsevier, vol. 49(3), pages 500-515, May.
- Kessing, Sebastian & Nuscheler, Robert, 2003.
"Monopoly pricing with negative network effects: the case of vaccines
[Monopolpreisbildung mit negativen Netzwerkeffekten am Beispiel von Impfstoffen]," Discussion Papers, Research Unit: Market Processes and Governance SP II 2003-06, Social Science Research Center Berlin (WZB).
- 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.
- Tisdell, Clem, 1982. "Exploitation of Techniques That Decline in Effectiveness with Use," Public Finance = Finances publiques, , vol. 37(3), pages 428-37.
- Mark Gersovitz & Jeffrey S. Hammer, 2004.
"The Economical Control of Infectious Diseases,"
Royal Economic Society, vol. 114(492), pages 1-27, 01.
- Laxminarayan, Ramanan & Brown, Gardner M., 2001.
"Economics of Antibiotic Resistance: A Theory of Optimal Use,"
Journal of Environmental Economics and Management,
Elsevier, vol. 42(2), pages 183-206, September.
- Laxminarayan, Ramanan & Brown, Gardner, 2000. "Economics of Antibiotic Resistance: A Theory of Optimal Use," Discussion Papers dp-00-36, Resources For the Future.
- Kenneth L. Judd, 1998. "Numerical Methods in Economics," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262100711, June.
- Kingston, William, 2000. "Antibiotics, invention and innovation," Research Policy, Elsevier, vol. 29(6), pages 679-710, June.
- Stéphane Mechoulan, 2005.
"Market Structure and Communicable Diseases,"
tecipa-241, University of Toronto, Department of Economics.
- 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.
- Coast, J. & Smith, R. D. & Millar, M. R., 1998. "An economic perspective on policy to reduce antimicrobial resistance," Social Science & Medicine, Elsevier, vol. 46(1), pages 29-38, January.
- Rudholm, Niklas, 2002. "Economic implications of antibiotic resistance in a global economy," Journal of Health Economics, Elsevier, vol. 21(6), pages 1071-1083, November.
- Scott Morton, Fiona M., 2000. "Barriers to entry, brand advertising, and generic entry in the US pharmaceutical industry," International Journal of Industrial Organization, Elsevier, vol. 18(7), pages 1085-1104, October.
When requesting a correction, please mention this item's handle: RePEc:eee:jhecon:v:29:y:2010:i:1:p:137-150. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Zhang, Lei)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.