Both of these moves broke the monopoly. The Canadian government broke Bayer's monopoly and the second company moved into the market, creating a temporary oligopoly. The influx of Cipro from Mexico represented a substitute product, thereby breaking Cipro's American monopoly. This lowered the price of the drug until demand subsided -- note that it was demand that subsided and not supply. This despite the fact that the monopoly-granting patent protection was affirmed in U.S. courts (Bayer, 2002).

Eventually, the market for Cipro returned to equilibrium once the crises was over. By seeing how the market changed when introduced to different stimuli, we can better understand the characteristics of this market.

The market for Cipro -- and in general all patent-protected medicines -- began as a monopoly in equilibrium. Bayer enjoyed substantial pricing power and demand stayed at or near the demand floor as a result. When demand began to price,...
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