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Market Structure, R&D and Advertising in the Pharmaceutical Industry

  • Matraves, Catherine

Recent developments in the literature on market structure have allowed the generation of a few key testable predictions from the theory of strategic behavior. The seminal model considers one simple but general relationship, that between market structure and market size, focusing on the competitive roles of endogenous sunk costs in the form of advertising and/or research and development. Evidence presented in this case study, building on earlier econometric work, shows that such endogenous sunk costs do play a crucial role in the formation of market structure in the global pharmaceutical industry. Copyright 1999 by Blackwell Publishing Ltd

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Article provided by Wiley Blackwell in its journal Journal of Industrial Economics.

Volume (Year): 47 (1999)
Issue (Month): 2 (June)
Pages: 169-94

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Handle: RePEc:bla:jindec:v:47:y:1999:i:2:p:169-94
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  1. Rebecca Henderson & Iain Cockburn, . "Scale, Scope and Spillovers: The Determinants of Research Productivity in Drug Discovery," Working Papers ec25/94, Department of Economics, University of Lancaster.
  2. Robinson, William T & Chiang, Jeongwen, 1996. "Are Sutton's Predictions Robust?: Empirical Insights into Advertising, R&D, and Concentration," Journal of Industrial Economics, Wiley Blackwell, vol. 44(4), pages 389-408, December.
  3. Steven Casper & Catherine Matraves, 1997. "Corporate Governance and Firm Strategy in the Pharmaceutical Industry," CIG Working Papers FS IV 97-20, Wissenschaftszentrum Berlin (WZB), Research Unit: Competition and Innovation (CIG).
  4. Henry Grabowski & John Vernon, 1990. "A New Look at the Returns and Risks to Pharmaceutical R&D," Management Science, INFORMS, vol. 36(7), pages 804-821, July.
  5. Klepper, Gernot, 1992. "Pharmaceuticals - Who's Afraid of `1992'?," CEPR Discussion Papers 675, C.E.P.R. Discussion Papers.
  6. DiMasi, Joseph A. & Hansen, Ronald W. & Grabowski, Henry G. & Lasagna, Louis, 1991. "Cost of innovation in the pharmaceutical industry," Journal of Health Economics, Elsevier, vol. 10(2), pages 107-142, July.
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