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

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  • 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.

Suggested Citation

  • 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.
    • Handle: RePEc:eee:resene:v:35:y:2013:i:4:p:582-598
    DOI: 10.1016/j.reseneeco.2013.08.001
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    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.
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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. Eswaran, Mukesh & Gallini, Nancy, 2017. "Can Competition Extend the Golden Age of Antibiotics?," Microeconomics.ca working papers -2017-9, Vancouver School of Economics, revised 19 Oct 2017.
    3. 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.

    More about this item

    Keywords

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

    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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