Abstract

http://ssrn.com/abstract=155851
 
 

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Network Effects and Diffusion in Pharmaceutical Markets: Antiulcer Drugs


Ernst R. Berndt


Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER)

Robert S. Pindyck


Massachusetts Institute of Technology (MIT) - Sloan School of Management; National Bureau of Economic Research (NBER)

Pierre Azoulay


MIT Sloan School of Management; National Bureau of Economic Research (NBER)

March 1999

NBER Working Paper No. w7024

Abstract:     
We examine the role of network effects in the demand for pharmaceuticals at both the brand level and for a therapeutic class of drugs. These effects emerge when use of a drug by others conveys information about its efficacy and safety to patients and physicians. This can lead to herd behavior where a particular drug -- not necessarily the most efficacious or safest -- can come to dominate the market despite the availability of close substitutes, and can also affect the rate of market diffusion. Using data for H2-antagonist antiulcer drugs, we examine two aspects of these effects. First, we use hedonic price procedures to estimate how the aggregate usage of a drug affects brand valuation. Second, we estimate discrete-time diffusion models at both the industry and brand levels to measure the impact on rates of diffusion and market saturation.

Number of Pages in PDF File: 33

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Date posted: July 7, 1999  

Suggested Citation

Berndt, Ernst R. and Pindyck, Robert S. and Azoulay, Pierre, Network Effects and Diffusion in Pharmaceutical Markets: Antiulcer Drugs (March 1999). NBER Working Paper No. w7024. Available at SSRN: http://ssrn.com/abstract=155851

Contact Information

Ernst R. Berndt (Contact Author)
Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )
Room E52-452
Cambridge, MA 02142
United States
617-253-2665 (Phone)
617-258-6055 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Robert S. Pindyck
Massachusetts Institute of Technology (MIT) - Sloan School of Management ( email )
50 Memorial Drive, E52-450
Cambridge, MA 02142
United States
617-253-6641 (Phone)
617-258-6855 (Fax)
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
Pierre Azoulay
MIT Sloan School of Management ( email )
50 Memorial Drive
Cambridge, MA 02139-4307
United States
HOME PAGE: http://scripts.mit.edu/~pazoulay/
National Bureau of Economic Research (NBER)
1050 Massachusetts Avenue
Cambridge, MA 02138
United States
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References:  28
Citations:  10
Footnotes:  14

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