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Uncertainty in the Generic Versus Brand Name Prescription Decision

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Author Info
Hellström, Jörgen () (Department of Economics, Umeå University)
Rudholm, Niklas () (Department of Economics, Umeå University)
Abstract

This paper analyzes the impact of uncertainty concerning product quality of generic drugs on the substitution behavior of prescribing physicians. It is shown that uncertainty about the generic drug quality gives the physician a value of waiting for more information before switching to the generic version. In addition, it is shown that reducing the approval requirements for generic drugs, thereby increasing uncertainty about quality, may discourage physicians from prescribing such drugs. A small empirical study supports the theoretical findings and indicate that uncertainty about the quality of generic drugs do affect physician prescription behavior.

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Publisher Info
Paper provided by Umeå University, Department of Economics in its series Umeå Economic Studies with number 602.

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Length: 21 pages
Date of creation: 20 Jan 2003
Date of revision:
Handle: RePEc:hhs:umnees:0602

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Postal: Department of Economics, Umeå University, S-901 87 Umeå, Sweden
Phone: 090 - 786 61 42
Fax: 090 - 77 23 02
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Web page: http://www.econ.umu.se/
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Related research
Keywords: Pharmaceutical industry; uncertainty; real options;

Find related papers by JEL classification:
I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology

This paper has been announced in the following NEP Reports:

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Newey, Whitney K & West, Kenneth D, 1987. "A Simple, Positive Semi-definite, Heteroskedasticity and Autocorrelation Consistent Covariance Matrix," Econometrica, Econometric Society, vol. 55(3), pages 703-08, May. [Downloadable!] (restricted)
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  2. McDonald, Robert & Siegel, Daniel, 1986. "The Value of Waiting to Invest," The Quarterly Journal of Economics, MIT Press, vol. 101(4), pages 707-27, November. [Downloadable!] (restricted)
  3. Fiona M. Scott Morton, 1999. "Entry Decisions in the Generic Pharmaceutical Industry," Yale School of Management Working Papers ysm119, Yale School of Management. [Downloadable!]
  4. Fiona M. Scott Morton, 1999. "Entry Decisions in the Generic Pharmaceutical Industry," RAND Journal of Economics, The RAND Corporation, vol. 30(3), pages 421-440, Autumn. [Downloadable!] (restricted)
  5. Spence, A Michael, 1973. "Job Market Signaling," The Quarterly Journal of Economics, MIT Press, vol. 87(3), pages 355-74, August. [Downloadable!] (restricted)
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