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Innovation and antibiotic use within antibiotic classes: Market incentives and economic instruments

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Listed author(s):
  • Herrmann, Markus
  • Nkuiya, Bruno
  • Dussault, Anne-Renée

Abstract

We analyze a monopolist's incentive to innovate a new antibiotic which is connected to the same pool of antibiotic treatment efficacy as is another drug produced by a generic industry. We outline the differences of antibiotic use under market conditions and in the social optimum. A time- and state-dependent tax-subsidy mechanism is proposed to induce the monopolist and generic industry to exploit antibiotic efficacy optimally.

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File URL: http://www.sciencedirect.com/science/article/pii/S0928765513000523
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Article provided by Elsevier in its journal Resource and Energy Economics.

Volume (Year): 35 (2013)
Issue (Month): 4 ()
Pages: 582-598

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Handle: RePEc:eee:resene:v:35:y:2013:i:4:p:582-598
DOI: 10.1016/j.reseneeco.2013.08.001
Contact details of provider: Web page: http://www.elsevier.com/locate/inca/505569

Keywords: Economics of antibiotic resistance; Antibiotic innovation; Monopoly; Generic industry; Social optimum; Economic instruments;

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Find related papers by JEL classification:
  • D21 - Microeconomics - - Production and Organizations - - - Firm Behavior: Theory
  • D42 - Microeconomics - - Market Structure, Pricing, and Design - - - Monopoly
  • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
  • Q38 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Nonrenewable Resources and Conservation - - - Government Policy (includes OPEC Policy)

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  1. Daubanes, Julien, 2011. "Optimal taxation of a monopolistic extractor: Are subsidies necessary?," Energy Economics, Elsevier, vol. 33(3), pages 399-403, May.
  2. Benchekroun, Hassan & Van Long, Ngo, 2002. "On the multiplicity of efficiency-inducing tax rules," Economics Letters, Elsevier, vol. 76(3), pages 331-336, August.
  3. 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.
  4. 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.
  5. Markus Herrmann & Ramanan Laxminarayan, 2010. "Antibiotic Effectiveness: New Challenges in Natural Resource Management," Annual Review of Resource Economics, Annual Reviews, vol. 2(1), pages 125-138, October.
  6. Karp, Larry, 1992. "Efficiency Inducing Tax for a Common Property Oligopoly," Economic Journal, Royal Economic Society, vol. 102(411), pages 321-332, March.
  7. 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.
  8. Léonard,Daniel & Long,Ngo van, 1992. "Optimal Control Theory and Static Optimization in Economics," Cambridge Books, Cambridge University Press, number 9780521331586, November.
  9. Karp, Larry, 1992. "Social Welfare in a Common Property Oligopoly," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 33(2), pages 353-372, May.
  10. Herrmann, Markus, 2010. "Monopoly pricing of an antibiotic subject to bacterial resistance," Journal of Health Economics, Elsevier, vol. 29(1), pages 137-150, January.
  11. Karp, Larry & Livernois, John, 1992. "On efficiency-inducing taxation for a non-renewable resource monopolist," Journal of Public Economics, Elsevier, vol. 49(2), pages 219-239, November.
  12. Rudholm, Niklas, 2002. "Economic implications of antibiotic resistance in a global economy," Journal of Health Economics, Elsevier, vol. 21(6), pages 1071-1083, November.
  13. Carolyn Fischer & Ramanan Laxminarayan, 2004. "Monopoly extraction of an exhaustible resource with two markets," Canadian Journal of Economics, Canadian Economics Association, vol. 37(1), pages 178-188, February.
  14. Stéphane Mechoulan, 2007. "Market structure and communicable diseases," Canadian Journal of Economics, Canadian Economics Association, vol. 40(2), pages 468-492, May.
  15. Ramanan Laxminarayan, 2002. "How Broad Should the Scope of Antibiotics Patents Be?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 84(5), pages 1287-1292.
  16. Bergstrom, Theodore C. & Cross, John G. & Porter, Richard C., 1981. "Efficiency-inducing taxation for a monopolistically supplied depletable resource," Journal of Public Economics, Elsevier, vol. 15(1), pages 23-32, February.
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Cited by:

  1. Eswaran, Mukesh & Gallini, Nancy, 2016. "Rescuing the Golden Age of Antibiotics: Can Economics Help Avert the Looming Crisis?," Economics working papers nancy_gallini-2016-9, Vancouver School of Economics, revised 04 Jul 2016.
  2. Bialek, Sylwia, 2016. "Introducing Cattle Producer to the Hardin s World- Can Monopolies in Seed Markets Be Welfare Enhancing?," Annual Conference 2016 (Augsburg): Demographic Change 145786, Verein für Socialpolitik / German Economic Association.

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