Social Welfare Loss in Antidepressant and Antipsychotic Pharmaceutical Markets
نویسندگان
چکیده
We study allocative inefficiency under monopoly using a two-good general-equilibrium monopoly production model. Individuals are heterogeneous with respect to preferences. We compare social welfare under monopoly with welfare under perfect competition. We then apply this model to the antidepressant and antipsychotic pharmaceutical markets. We find that, for nine specific drugs, annual social-welfare losses ranged from $63 million to $658 million in 2003. We estimate the true cost of introducing a new pharmaceutical product under the current patented monopoly system to be approximately $4.2 billion.
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