1. Worst-Case Bounds on R&D and Pricing Distortions: Theory and Disturbing Conclusions if Consumer Values Follow the World Income Distribution Michael Kremer Harvard University Christopher Snyder Dartmouth College

2. Introduction

3. Basic Ideas 1 1 1/2 Figure 1: Numerical example

4. Basic Ideas 1 1 1/2 Figure 2: STRZ demand curve

5. Vaccines versus Drugs Spin off paper from Kremer & Snyder (2015) Zipf distribution of disease risk limits ability to extract rent with vaccine Risk resolves when drug sold, leading to possible bias against vaccines Ideal laboratory for general ideas here, plus calibrations and empirical tests Equal revenue (STRZ) demand Maleug & Snyder (2006) bounding profitability of price discrimination Hartline & Roughgarden (2009) compare worst case from auction mechanisms Brooks (2013) optimality of proposed auction mechanism Bergemann, Brooks & Morris (2014) general welfare results for price discrimination Rent extraction and efficiency Makowski & Ostroy (1995, 2001) Shape of demand curves Anderson & Renault (2003); Johnson & Myatt (2006); Garber, Jones & Romer (2006); Weyl & Fabinger (2013); Fabinger & Weyl (2015) Innovation incentives Dosi (1988); Freeman (1994); Acemolu & Linn (2004); Weyl & Tirole (2012); Budish, Roin, & Williams (2013) Literature

6. Model

8. Bounding Deadweight Loss

9. General Oligopoly Models

11. STRZ Demand

13. Decomposition

14. Static Inefficiency

15. Specific Distributions Discrete

16. Specific Distributions Beta

17. Specific Distributions Means, medians, modes

18. Specific Distributions General demand curvature

19. World Income Calibration Figure 12: World income distribution from Pinkovsky and Sala-i-Martin (2009) Figure 13: Calibrated producer surplus using 2006 data