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Diffusion of innovations in social interaction systems. An agent-based model for the introduction of new drugs in markets

  • Julio Pombo-Romero


  • Luis Varela
  • Carlos Ricoy
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    The existence of imitative behavior among consumers is a well-known phenomenon in the field of Economics. This behavior is especially common in markets determined by a high degree of innovation, asymmetric information and/or price-inelastic demand, features that exist in the pharmaceutical market. This paper presents evidence of the existence of imitative behavior among primary care physicians in Galicia (Spain) when choosing treatments for their patients. From this and other evidence, we propose a dynamic model for determining the entry of new drugs into the market. To do this, we introduce the structure of the organization of primary health care centers and the presence of groups of doctors who are specially interrelated, as well as the existence of commercial pressure on doctors. For modeling purposes, physicians are treated as spins connected in an exponentially distributed complex network of the Watts-Strogatz type. The proposed model provides an explanation for the differences observed in the patterns of the introduction of technological innovations in different regions. The main cause of these differences is the different structure of relationships among consumers, where the existence of small groups that show a higher degree of coordination over the average is particularly influential. The evidence presented, together with the proposed model, might be useful for the design of optimal strategies for the introduction of new drugs, as well as for planning policies to manage pharmaceutical expenditure. Copyright Springer-Verlag 2013

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    Article provided by Springer in its journal The European Journal of Health Economics.

    Volume (Year): 14 (2013)
    Issue (Month): 3 (June)
    Pages: 443-455

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    Handle: RePEc:spr:eujhec:v:14:y:2013:i:3:p:443-455
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    1. Heston, Steven L, 1993. "A Closed-Form Solution for Options with Stochastic Volatility with Applications to Bond and Currency Options," Review of Financial Studies, Society for Financial Studies, vol. 6(2), pages 327-43.
    2. Charles F. Manski, 2000. "Economic Analysis of Social Interactions," NBER Working Papers 7580, National Bureau of Economic Research, Inc.
    3. Manski, Charles F, 1993. "Identification of Endogenous Social Effects: The Reflection Problem," Review of Economic Studies, Wiley Blackwell, vol. 60(3), pages 531-42, July.
    4. Zijun Wang, 2009. "The convergence of health care expenditure in the US states," Health Economics, John Wiley & Sons, Ltd., vol. 18(1), pages 55-70.
    5. Richmond, Peter & Sabatelli, Lorenzo, 2004. "Langevin processes, agent models and socio-economic systems," Physica A: Statistical Mechanics and its Applications, Elsevier, vol. 336(1), pages 27-38.
    6. Gort, Michael & Klepper, Steven, 1982. "Time Paths in the Diffusion of Product Innovations," Economic Journal, Royal Economic Society, vol. 92(367), pages 630-53, September.
    7. Mickael Bech & Jørgen Lauridsen, 2009. "Exploring spatial patterns in general practice expenditure," The European Journal of Health Economics, Springer, vol. 10(3), pages 243-254, July.
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