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Decisions of persons, the pharmaceutical industry, and donors in disease contraction and recovery assuming virus mutation

Author

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  • Kjell Hausken

    (University of Stavanger)

  • Mthuli Ncube

    (Said Business School, University of Oxford)

Abstract

Background The article develops an eight-period game between N persons and a pharmaceutical company. The choices of a donor and Nature are parametric. Methods Persons choose between safe and risky behavior, and whether or not to buy drugs. The pharmaceutical company chooses whether or not to develop drugs. The donor chooses parametrically whether to subsidize drug purchases and drug developments. Nature chooses disease contraction, recovery, death, and virus mutation. The game is solved with backward induction. Results The conditions are specified for each of seven outcomes ranging from safe behavior to risky behavior and buying no or one or both drugs. The seven outcomes distribute themselves across three outcomes for the pharmaceutical company, which are to develop no drugs, develop one drug, and develop two drugs if the virus mutates. For these three outcomes the donor’s expected utility is specified. Conclusion HIV/AIDS data is used to present a procedure for parameter estimation. The players’ strategic choices are exemplified. The article shows how strategic interaction between persons and a pharmaceutical company, with parametric choices of a donor and Nature, impact whether persons choose risky or safe behavior, whether a pharmaceutical company develops no drugs or one drug, or two drugs if a virus mutates, and the impact of subsidies by a donor.

Suggested Citation

  • Kjell Hausken & Mthuli Ncube, 2021. "Decisions of persons, the pharmaceutical industry, and donors in disease contraction and recovery assuming virus mutation," Health Economics Review, Springer, vol. 11(1), pages 1-14, December.
    • Handle: RePEc:spr:hecrev:v:11:y:2021:i:1:d:10.1186_s13561-021-00320-4
    DOI: 10.1186/s13561-021-00320-4
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    References listed on IDEAS

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    1. Till Bärnighausen & Joshua A Salomon & Nalinee Sangrujee, 2012. "HIV Treatment as Prevention: Issues in Economic Evaluation," PLOS Medicine, Public Library of Science, vol. 9(7), pages 1-5, July.
    2. Michael Kremer & Christopher M. Snyder, 2003. "Why Are Drugs More Profitable Than Vaccines?," NBER Working Papers 9833, National Bureau of Economic Research, Inc.
    3. Michael Kremer & Christopher M. Snyder, 2015. "Preventives Versus Treatments," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 130(3), pages 1167-1239.
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