Dominant strategy in Australian drug market
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Dominant strategy in Australian drug market
According to this article, the Australian parliament has enacted legislation which artificially inflates the price of generic medicines. When a company wants to lower the price of its generics, it must first inform other drug manufacturers of its decision so that they are ready to produce their own generics. This means that no company has the incentive to be the first to lower prices - rather, there exists a dominant strategy for companies to wait for others to lower prices. If only politicians knew economics...
adamp- Posts : 28
Join date : 2009-04-11
Re: Dominant strategy in Australian drug market
The article was not very specific about timing. I'm wondering if the companies can send an email in the morning, lower prices at noon, make a huge profit in the afternoon, and raise them back at night. Maybe the time scale on that would be stretched out some, but even if they know what their opponent is doing, they probably still need some non negligible amount of time to react whereas the opponent does not.
Stephen Brenner- Posts : 28
Join date : 2009-04-13
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