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Decisions of persons, the pharmaceutical industry, and donors in disease contraction and recovery assuming virus mutation

Kjell Hausken () and Mthuli Ncube ()
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Mthuli Ncube: Said Business School, University of Oxford

Health Economics Review, 2021, vol. 11, issue 1, 1-14

Abstract: Abstract Background The article develops an eight-period game between N persons and a pharmaceutical company. The choices of a donor and Nature are parametric. Methods Persons choose between safe and risky behavior, and whether or not to buy drugs. The pharmaceutical company chooses whether or not to develop drugs. The donor chooses parametrically whether to subsidize drug purchases and drug developments. Nature chooses disease contraction, recovery, death, and virus mutation. The game is solved with backward induction. Results The conditions are specified for each of seven outcomes ranging from safe behavior to risky behavior and buying no or one or both drugs. The seven outcomes distribute themselves across three outcomes for the pharmaceutical company, which are to develop no drugs, develop one drug, and develop two drugs if the virus mutates. For these three outcomes the donor’s expected utility is specified. Conclusion HIV/AIDS data is used to present a procedure for parameter estimation. The players’ strategic choices are exemplified. The article shows how strategic interaction between persons and a pharmaceutical company, with parametric choices of a donor and Nature, impact whether persons choose risky or safe behavior, whether a pharmaceutical company develops no drugs or one drug, or two drugs if a virus mutates, and the impact of subsidies by a donor.

Keywords: Pharmaceutical industry; Health; Patients; Donors; Safe versus risky behavior; Disease contraction; Recovery; Death; Drug development; Virus mutation; Subsidies; Game theory (search for similar items in EconPapers)
Date: 2021
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DOI: 10.1186/s13561-021-00320-4

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