Assess the view that the market structure of the pharmaceutical industry is damaging for consumers.
Using the extracts and your knowledge of economics, assess the view that the market structure of the pharmaceutical industry is damaging for consumers. (November 2021)
Plan
- Introduction
- define oligopoly
- explain that oligopolies vary by conduct
- Argument 1
- Oligopoly is a bad market structure
- Allocatively inefficient
- Diagram 1
- Monopoly power diagram
- P>MC
- Evaluation 1
- Dynamic efficiency
- Argument 2
- Kinked demand curve
- Fear/ interdependence
- Firms in an oligopoly are not always able to exploit customers
- Diagram
- Kinked demand curve
- Prisoner's dilemma
- Evaluation
- Depends on the CMA
- Depends on long-term relationsip between firms
- Tacit collusion?
- Judgement
- Overall, high prices are necessary because pharmaceuticals require so much investment to develop. However, oligopolies can be harmful in other industries. The government can/ do subsidise when necessary e.g. with COVID vaccines