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Pseudo-Generic Products and Mergers in Pharmaceutical Markets

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  • Granier, L.
  • Trinquard, S.

Abstract

This paper fills the gap in the theoretical literature concerning mergers between brand-name and generic laboratories in pharmaceutical markets. To prevent generic firms from increasing their market share, some brand-name furms produce generics themselves, called pseudo-generics, enabling them to set up barriers to entry. We develop this topic by considering the pseudo-generics production as a mergers.catalyst. We show, in a duopoly model with substitutable goods, in which a brand-name firm and a generic firm compete à la Cournot, that a brand-name company always has an incentive to purchase its competitor. The key insight of this paper is that the brand-name laboratory can increase its merger gain by producing pseudo-generics beforehand. In some cases, pseudo-generics would not otherwise be produced.

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Bibliographic Info

Paper provided by LASER (Laboratoire de Science Economique de Richter), Faculty of Economics, University of Montpellier 1 in its series Cahiers du LASER (LASER Working Papers) with number 2006.18.

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Length: 29 pages
Date of creation: 2006
Date of revision:
Handle: RePEc:mop:lasrwp:2006.18

Contact details of provider:
Postal: LASER, Faculté d'Economie, Avenue Raymond Dugrand, CS 79606, 34960 MONTPELLIER Cedex 2, France
Web page: http://www.laser.univ-montp1.fr
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Keywords: Mergers; Pharmaceutical Market; Pseudo-Generics.;

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