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Monopoly pricing with negative network effects: the case of vaccines
[Monopolpreisbildung mit negativen Netzwerkeffekten am Beispiel von Impfstoffen]

  • Kessing, Sebastian
  • Nuscheler, Robert

We study the market for vaccinations considering income heterogeneity on the demand side and monopoly power on the supply side. A monopolist has an incentive to exploit the external effect of vaccinations and leave the poor susceptible in order to increase the willingness to pay of the rich. Even the possibility to perfectly price discriminate does not remove this incentive. Pigouvian subsidies may even make things worse. Mandatory vaccination programs covering only the poor succeed in eradicating the disease. This offers an efficiency based rationale for distribution-oriented national or international public health interventions.

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Paper provided by Social Science Research Center Berlin (WZB) in its series Discussion Papers, Research Unit: Market Processes and Governance with number SP II 2003-06.

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Date of creation: 2003
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Handle: RePEc:zbw:wzbmpg:spii200306
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  1. Tomas Philipson & Stephane Mechoulan, 2003. "Intellectual Property & External Consumption Effects: Generalizations from Pharmaceutical Markets," NBER Working Papers 9598, National Bureau of Economic Research, Inc.
  2. Michael Kremer, 2002. "Pharmaceuticals and the Developing World," Journal of Economic Perspectives, American Economic Association, vol. 16(4), pages 67-90, Fall.
  3. Tomas Philipson, 1996. "Private Vaccination and Public Health: An Empirical Examination for U.S. Measles," Journal of Human Resources, University of Wisconsin Press, vol. 31(3), pages 611-630.
  4. Luis Cabral & David Salant & Glenn Woroch, 1994. "Monopoly Pricing With Network Externalities," Industrial Organization 9411003, EconWPA.
  5. 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.
  6. 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.
  7. Francis, Peter J., 1997. "Dynamic epidemiology and the market for vaccinations," Journal of Public Economics, Elsevier, vol. 63(3), pages 383-406, February.
  8. Kessing, Sebastian & Nuscheler, Robert, 2003. "Monopoly pricing with negative network effects: the case of vaccines
    [Monopolpreisbildung mit negativen Netzwerkeffekten am Beispiel von Impfstoffen]
    ," Discussion Papers, Research Unit: Market Processes and Governance SP II 2003-06, Social Science Research Center Berlin (WZB).
  9. 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.
  10. Mason, Robin, 2000. "Network externalities and the Coase conjecture," European Economic Review, Elsevier, vol. 44(10), pages 1981-1992, December.
  11. Bensaid, Bernard & Lesne, Jean-Philippe, 1996. "Dynamic monopoly pricing with network externalities," International Journal of Industrial Organization, Elsevier, vol. 14(6), pages 837-855, October.
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