Characteristics of Demand for Pharmaceutical Products: An Examination of Four Cephalosporins

RAND JOURNAL OF ECONOMICS, Vol. 28, No. 3, Autumn 1997

Posted: 12 Mar 1997

See all articles by Sara Fisher Ellison

Sara Fisher Ellison

Massachusetts Institute of Technology (MIT) - Department of Economics

Iain M. Cockburn

Boston University Questrom School of Business; National Bureau of Economic Research (NBER)

Zvi Griliches

(Deceased)

Jerry A. Hausman

Massachusetts Institute of Technology (MIT) - Department of Economics; National Bureau of Economic Research (NBER)

Abstract

We model demand for four cephalosporins and compute own- and cross-price elasticities between branded and generic versions of the four drugs. We model demand as a multi-stage budgeting problem, and we argue that such a model is appropriate to the multi-stage nature of the purchase of pharmaceutical products, in particular the prescribing and dispensing stages. We find quite high elasticities between generic substitutes and also significant elasticities between some therapeutic substitutes.

JEL Classification: L65

Suggested Citation

Fisher Ellison, Sara and Cockburn, Iain M. and Griliches, Zvi and Hausman, Jerry A., Characteristics of Demand for Pharmaceutical Products: An Examination of Four Cephalosporins. RAND JOURNAL OF ECONOMICS, Vol. 28, No. 3, Autumn 1997, Available at SSRN: https://ssrn.com/abstract=8727

Sara Fisher Ellison (Contact Author)

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

50 Memorial Drive
Room E52-262C
Cambridge, MA 02142
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617-253-3821 (Phone)
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Iain M. Cockburn

Boston University Questrom School of Business ( email )

595 Commonwealth Avenue
Boston, MA MA 02215
United States
617-353-3775 (Phone)

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Zvi Griliches

(Deceased)

Jerry A. Hausman

Massachusetts Institute of Technology (MIT) - Department of Economics ( email )

50 Memorial Drive
Room E52-271a
Cambridge, MA 02142
United States
617-253-3644 (Phone)
617-253-1330 (Fax)

National Bureau of Economic Research (NBER)

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

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