Price and Treatment Decisions in Epidemics — Stackelberg and Bargaining Games: The Role of Cost Functions

Andrea Di Liddo ()
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Andrea Di Liddo: Department of Economics, University of Foggia, Largo Papa Giovanni Paolo II, 71121 Foggia, Italy

International Game Theory Review (IGTR), 2020, vol. 22, issue 01, 1-33

Abstract: The shape of cost functions significantly influences the solution of optimization problems related to the treatment of infectious diseases. The classical linear or quadratic cost functions are widely used in the literature more to make the problems tractable than for their relevance with the model studied. For example, they do not seem appropriate when expensive therapies are required to treat a large number of patients, as in the case of the treatment of hepatitis C by sofosbuvir. In this paper, we study the strategic interactions between pharmaceutical companies and public authorities to determine the price of patented drugs and the number of treated infected people. A Stackelberg game and a Nash bargaining game are studied. In particular, we analyze the relationship between the different cost functions and the equilibria of the games.

Keywords: Health markets; Stackelberg equilibria; Nash bargaining; cost functions; expensive treatments; blow-up (search for similar items in EconPapers)
Date: 2020
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DOI: 10.1142/S0219198919500075

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