1. Read the two posted readings, by Loftus and Pauly (“New Push Ties Cost of Drugs to How Well They Work” and “Pay for Performance is No miracle Cure”.) Does the “specific pricing” or “pay for performance” model fit the classic definition of price discrimination? Why or why not? Please check each of the relevant criteria.
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2. Do you believe switching from a model in which everyone pays the same price for drugs to a model where different users pay different prices will impact the efficiency and surplus distribution in this market? Why or why not? Use simple supply/demand diagrams to complement your answer.
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