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Pseudo-Generic Products and Mergers in Pharmaceutical Markets

Author

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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.

Suggested Citation

  • Granier, L. & Trinquard, S., 2006. "Pseudo-Generic Products and Mergers in Pharmaceutical Markets," Cahiers du LASER (LASER Working Papers) 2006.18, LASER (Laboratoire de Science Economique de Richter), Faculty of Economics, University of Montpellier 1.
  • Handle: RePEc:mop:lasrwp:2006.18
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    File URL: http://www.laser.univ-montp1.fr/Cahiers/cahier180106.pdf
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    Cited by:

    1. Laurent Granier & Sebastien Trinquard, 2010. "Entry deterrence and mergers under price competition in pharmaceutical markets," Applied Economics, Taylor & Francis Journals, vol. 42(3), pages 297-309.

    More about this item

    Keywords

    Mergers; Pharmaceutical Market; Pseudo-Generics.;

    JEL classification:

    • I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
    • L12 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Monopoly; Monopolization Strategies

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