TY - BOOK ID - 137122436 TI - When Is Prevention More Profitable than Cure? The Impact of Time-Varying Consumer Heterogeneity AU - Kremer, Michael. AU - Snyder, Christopher M. AU - National Bureau of Economic Research. PY - 2013 PB - Cambridge, Mass. National Bureau of Economic Research DB - UniCat UR - https://www.unicat.be/uniCat?func=search&query=sysid:137122436 AB - We argue that in pharmaceutical markets, variation in the arrival time of consumer heterogeneity creates differences between a producer's ability to extract consumer surplus with preventives and treatments, potentially distorting R&D decisions. If consumers vary only in disease risk, revenue from treatments--sold after the disease is contracted, when disease risk is no longer a source of private information--always exceeds revenue from preventives. The revenue ratio can be arbitrarily high for sufficiently skewed distributions of disease risk. Under some circumstances, heterogeneity in harm from a disease, learned after a disease is contracted, can lead revenue from a treatment to exceed revenue from a preventative. Calibrations suggest that skewness in the U.S. distribution of HIV risk would lead firms to earn only half the revenue from a vaccine as from a drug. Empirical tests are consistent with the predictions of the model that vaccines are less likely to be developed for diseases with substantial disease-risk heterogeneity. ER -