Consumer Learning and the Entry of Generic Pharmaceuticals / Neha Bairoliya, Pinar Karaca-Mandic, Jeffrey S. McCullough, Amil Petrin.

Format:

Book

Author/Creator:

Bairoliya, Neha.

Contributor:

National Bureau of Economic Research.

Karaca-Mandic, Pinar.

McCullough, Jeffrey S.

Petrin, Amil.

Series:

Working Paper Series (National Bureau of Economic Research) no. w23662.

NBER working paper series no. w23662

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2017.

Summary:

Generic pharmaceuticals provide low-cost access to treatment. Despite their chemical equivalence to branded products, many mechanisms may hinder generic substitution. Consumers may be unaware of their equivalence. Firms may influence consumers through advertising or product line extensions. We estimate a structural model of pharmaceutical demand where consumers learn about stochastic match qualities with specific drugs. Naïve models, without consumer heterogeneity and learning, grossly underestimate demand elasticities. Consumer bias against generics critically depends on experience. Advertising and line extensions yield modest increases in branded market shares. These effects are dominated by consumers' initial perception bias against generics.

Notes:

Print version record

August 2017.