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Characteristics of Demand for Pharmaceutical Products: An Examination of Four Cephalosporins

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  • Sara Ellison Fisher
  • Iain Cockburn
  • Zvi Griliches
  • Jerry Hausman

Abstract

We model demand for four cephalosporins and compute own- and cross-price elasticities between branded and generic versions of the four drugs. We model demand as a multistage budgeting problem, and we argue that such a model is appropriate to the multistage nature of the purchase of pharmaceutical products, in particular the prescribing and dispensing stages. We find quite high elasticities between generic substitutes and also significant elasticities between some therapeutic substitutes.

Suggested Citation

  • Sara Ellison Fisher & Iain Cockburn & Zvi Griliches & Jerry Hausman, 1997. "Characteristics of Demand for Pharmaceutical Products: An Examination of Four Cephalosporins," RAND Journal of Economics, The RAND Corporation, vol. 28(3), pages 426-446, Autumn.
  • Handle: RePEc:rje:randje:v:28:y:1997:i:autumn:p:426-446
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    JEL classification:

    • L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology; Plastics

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