Strategic dynamics of antibiotic use and the evolution of antibiotic-resistant infections

Abstract

Abstract This paper studies a dynamic model of a fee-for-service healthcare system in which healthcare providers attract patients by prescribing antibiotics. Using antibiotics limits antibiotic-treatable infections, but fosters the growth of antibiotic-resistant infections. The paper demonstrates a ‘Goldilocks’ effect from provider competition. A perfectly competitive market for providers over-prescribes antibiotics because providers do not bear the cost of antibiotic-resistant infections. A patient monopolist under-prescribes antibiotics in order to increase the level of treatable infection. This is because while infection is a ‘bad’ for society, infection is a ‘good’ for a provider of antibiotics under a fee-for-service regime. Due to more moderate antibiotic use, oligopolistic competition can be the optimal decentralized market structure. The paper then demonstrates how the model can be used for policy analysis.