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Market Structure and Communicable Diseases

  • Stéphane Mechoulan

Communicable diseases pose a formidable challenge for public policy. Using numerical simulations, we show under which scenarios a monopolist’s price and prevalence paths converge to a nonzero steady-state. In contrast, a planner typically eradicates the disease. If eradication is impossible, the planner subsidizes treatments as long as the prevalence can be controlled. Drug resistance exacerbates the welfare difference between monopoly and first best outcomes. Nevertheless, because the negative externalities from resistance compete with the positive externalities of treatment, a mixed competition/monopoly regime may perform better than competition alone. This result has important implications for the design of many drug patents.

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Paper provided by University of Toronto, Department of Economics in its series Working Papers with number tecipa-241.

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Length: 37 pages
Date of creation: 27 Jun 2005
Date of revision:
Handle: RePEc:tor:tecipa:tecipa-241
Contact details of provider: Postal: 150 St. George Street, Toronto, Ontario
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  1. Philipson, Tomas, 2000. "Economic epidemiology and infectious diseases," Handbook of Health Economics, in: A. J. Culyer & J. P. Newhouse (ed.), Handbook of Health Economics, edition 1, volume 1, chapter 33, pages 1761-1799 Elsevier.
  2. Scott Barrett, 2003. "Global Disease Eradication," Journal of the European Economic Association, MIT Press, vol. 1(2-3), pages 591-600, 04/05.
  3. Steven M. Goldman and James Lightwood., 1996. "Cost Optimization in the SIS Model of Infectious Disease with Treatment," Economics Working Papers 96-245, University of California at Berkeley.
  4. Mark Gersovitz & Jeffrey S. Hammer, 2003. "Infectious Diseases, Public Policy, and the Marriage of Economics and Epidemiology," World Bank Research Observer, World Bank Group, vol. 18(2), pages 129-157.
  5. Barrett, Scott & Hoel, Michael, 2007. "Optimal disease eradication," Environment and Development Economics, Cambridge University Press, vol. 12(05), pages 627-652, October.
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  7. Alistair Munro, 1997. "Economics and biological evolution," Environmental & Resource Economics, European Association of Environmental and Resource Economists, vol. 9(4), pages 429-449, June.
  8. Gersovitz, Mark & Hammer, Jeffrey S., 2005. "Tax/subsidy policies toward vector-borne infectious diseases," Journal of Public Economics, Elsevier, vol. 89(4), pages 647-674, April.
  9. Stephen P. A. Brown & William C. Gruben, 1997. "Intellectual property rights and product effectiveness," Economic and Financial Policy Review, Federal Reserve Bank of Dallas, issue Q IV, pages 15-20.
  10. Brito, Dagobert L. & Sheshinski, Eytan & Intriligator, Michael D., 1991. "Externalities and compulsary vaccinations," Journal of Public Economics, Elsevier, vol. 45(1), pages 69-90, June.
  11. Mark Gersovitz & Jeffrey S. Hammer, 2004. "The Economical Control of Infectious Diseases," Economic Journal, Royal Economic Society, vol. 114(492), pages 1-27, 01.
  12. Daily, Gretchen C. & Ehrlich, Paul R., 1996. "Impacts of development and global change on the epidemiological environment," Environment and Development Economics, Cambridge University Press, vol. 1(03), pages 311-346, July.
  13. John B. Horowitz & H. Brian Moehring, 2004. "How property rights and patents affect antibiotic resistance," Health Economics, John Wiley & Sons, Ltd., vol. 13(6), pages 575-583.
  14. Brown, Gardner & Layton, David F., 1996. "Resistance economics: social cost and the evolution of antibiotic resistance," Environment and Development Economics, Cambridge University Press, vol. 1(03), pages 349-355, July.
  15. Baumol, William J., 1996. "Antibiotics overuse and other threats," Environment and Development Economics, Cambridge University Press, vol. 1(03), pages 346-349, July.
  16. Geoffard, Pierre-Yves & Philipson, Tomas, 1997. "Disease Eradication: Private versus Public Vaccination," American Economic Review, American Economic Association, vol. 87(1), pages 222-30, March.
  17. Francis, Peter J., 1997. "Dynamic epidemiology and the market for vaccinations," Journal of Public Economics, Elsevier, vol. 63(3), pages 383-406, February.
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