Network Effects and Diffusion in Pharmaceutical Markets: Antiulcer Drugs / Ernst R. Berndt, Robert S. Pindyck, Pierre Azoulay.

Format:

Book

Author/Creator:

Berndt, Ernst R.

Contributor:

National Bureau of Economic Research.

Pindyck, Robert S.

Azoulay, Pierre.

Series:

Working Paper Series (National Bureau of Economic Research) no. w7024.

NBER working paper series no. w7024

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Other Title:

Network Effects and Diffusion in Pharmaceutical Markets

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 1999.

Summary:

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.

Notes:

Print version record

March 1999.