Mergers and Barriers to Entry In Pharmaceutical Markets
After patent expirations in pharmaceutical markets, brand-name laboratories are threatened by generic firms'entry. To fill the gap in the theoretical literature on this topic, we study brand-name .rms.incentives either to deter entry, or to merge with the entrant. These strategies are considered along with the possibility of the brandname firm producing its own generic drug, called a pseudo-generic drug. Using a vertical differentiation model with Bertrand-Stackelberg competition, we show that each strategy, merging and deterring entry, may be Nash equilibrium, according to the generic firm's setup cost level and to the rate of discount.
|Date of creation:||2007|
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