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Mergers and Barriers to Entry In Pharmaceutical Markets

Author

Listed:
  • Granier, L.
  • Trinquard, S.

Abstract

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.

Suggested Citation

  • Granier, L. & Trinquard, S., 2007. "Mergers and Barriers to Entry In Pharmaceutical Markets," Cahiers du LASER (LASER Working Papers) 2007.21, LASER (Laboratoire de Science Economique de Richter), Faculty of Economics, University of Montpellier 1.
    • Handle: RePEc:mop:lasrwp:2007.21
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    File URL: http://www.laser.univ-montp1.fr/Cahiers/cahier210107.pdf
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    More about this item

    Keywords

    barriers; endogenous mergers; limit pricing; pharmaceuticals; pseudo-;
    All these keywords.

    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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