A Dynamic Oligopoly Structural Model for the Prescription Drug Market after Patent Expiration

33 Pages Posted: 1 Jan 2011

See all articles by Andrew T. Ching

Andrew T. Ching

Johns Hopkins University - Carey Business School

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Date Written: November 18, 2010

Abstract

This article incorporates consumer learning and heterogeneity into a dynamic oligopoly model for the prescription drug market. In the model, both firms and patients need to learn the generic qualities via patients' experiences, generic firms' entry decisions are endogenous, but their entry timings depend on a random approval process. I apply the model to examine the impact of shortening the expected generic approval time. Although this policy experiment brings generics to the market sooner, it increases a potential entrant's likelihood of entering a crowded market and hence could reduce the total number of generic entrants and consumer welfare.

Suggested Citation

Ching, Andrew T., A Dynamic Oligopoly Structural Model for the Prescription Drug Market after Patent Expiration (November 18, 2010). International Economic Review, Vol. 51, Issue 4, pp. 1175-1207, 2010, Available at SSRN: https://ssrn.com/abstract=1732993 or http://dx.doi.org/10.1111/j.1468-2354.2010.00615.x

Andrew T. Ching (Contact Author)

Johns Hopkins University - Carey Business School ( email )

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Baltimore, MD 21202
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