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Market Structure and Communicable Diseases
Canadian Journal of Economics (2006)
  • Stéphane Mechoulan, Dalhousie University
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 non-zero 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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Publisher Statement
Winner of the Mundell Prize
Citation Information
Stéphane Mechoulan. "Market Structure and Communicable Diseases" Canadian Journal of Economics Vol. 40 Iss. 2 (2006)
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