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

  • Markus Herrmann
  • Bruno Nkuiya
  • Anne-Renée Dussault

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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Paper provided by CREATE in its series Cahiers de recherche CREATE with number 2013-3.

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Date of creation: 2013
Date of revision:
Handle: RePEc:lvl:creacr:2013-3
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  1. 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.
  2. 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.
  3. Markus Herrmann, 2009. "Monopoly Pricing of an Antibiotic Subject to Bacterial Resistance," Cahiers de recherche 0946, CIRPEE.
  4. 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.
  5. 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.
  6. Léonard,Daniel & Long,Ngo van, 1992. "Optimal Control Theory and Static Optimization in Economics," Cambridge Books, Cambridge University Press, number 9780521337465, October.
  7. Karp, Larry, 1992. "Efficiency Inducing Tax for a Common Property Oligopoly," Economic Journal, Royal Economic Society, vol. 102(411), pages 321-32, March.
  8. 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.
  9. Stéphane Mechoulan, 2007. "Market structure and communicable diseases," Canadian Journal of Economics, Canadian Economics Association, vol. 40(2), pages 468-492, May.
  10. 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 353-72, May.
  11. Benchekroun, Hassan & Van Long, Ngo, 2002. "On the multiplicity of efficiency-inducing tax rules," Economics Letters, Elsevier, vol. 76(3), pages 331-336, August.
  12. 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.
  13. 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.
  14. Rudholm, Niklas, 2002. "Economic implications of antibiotic resistance in a global economy," Journal of Health Economics, Elsevier, vol. 21(6), pages 1071-1083, November.
  15. Daubanes, Julien, 2011. "Optimal taxation of a monopolistic extractor: Are subsidies necessary?," Energy Economics, Elsevier, vol. 33(3), pages 399-403, May.
  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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