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Innovation and Antibiotic Use within Antibiotic Classes: Market Incentives and Economic Instruments

Author

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  • Markus Herrmann
  • Bruno Nkuiya
  • Anne-Renée Dussault

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

  • Markus Herrmann & Bruno Nkuiya & Anne-Renée Dussault, 2013. "Innovation and Antibiotic Use within Antibiotic Classes: Market Incentives and Economic Instruments," Cahiers de recherche CREATE 2013-3, CREATE.
  • Handle: RePEc:lvl:creacr:2013-3
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    File URL: https://www.create.ulaval.ca/sites/create.ulaval.ca/files/Publications/create2013-3.pdf
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    References listed on IDEAS

    as
    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.
    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.
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    Full references (including those not matched with items on IDEAS)

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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?," VfS Annual Conference 2016 (Augsburg): Demographic Change 145786, Verein für Socialpolitik / German Economic Association.

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    More about this item

    Keywords

    Economics of antibiotic resistance; antibiotic innovation; monopoly; generic industry; social optimum; economic instruments;
    All these keywords.

    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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