Uncertainty and Experimentation in Pharmaceutical Demand: Anti-Ulcer Drugs
AbstractDue to differences in the effectiveness and side effects of different drugs, uncertainty is an important component of prescription drug choice. This uncertainty can cause patients and doctors to experiment with different drugs until they find a good match. In this paper, we specify and estimate a dynamic model of pharmaceutical choice under uncertainty in which patients choose a drug in order to minimize the present discounted value of costs associated with treatment in the anti-ulcer drug market. We find strong evidence that this market is split into casual patients for whom uncertainty about drug quality doesn't matter, and serious patients for whom quality differentials between drugs matter, since a high quality drug can substantially lower the expected treatment length (and therefore the associated expected treatment costs). We consider the implications of these results for innovation in this drug market.
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Bibliographic InfoPaper provided by Duke University, Department of Economics in its series Working Papers with number 98-11.
Date of creation: 1998
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Postal: Department of Economics Duke University 213 Social Sciences Building Box 90097 Durham, NC 27708-0097
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Find related papers by JEL classification:
- C15 - Mathematical and Quantitative Methods - - Econometric and Statistical Methods and Methodology: General - - - Statistical Simulation Methods: General
- C61 - Mathematical and Quantitative Methods - - Mathematical Methods; Programming Models; Mathematical and Simulation Modeling - - - Optimization Techniques; Programming Models; Dynamic Analysis
- I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
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- Andrew Ching & Masakazu Ishihara, 2010. "The effects of detailing on prescribing decisions under quality uncertainty," Quantitative Marketing and Economics, Springer, vol. 8(2), pages 123-165, June.
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