Characterizing Informational Barriers To Entry In The Anti-Ulcer Drug Market
We empirically quantify and characterize informational barriers to entry into the anti-ulcer drug market by studying the diffusion process of the molecule Omeprazole in the first 30 months after it entered the market. Using a novel panel dataset tracking doctors' complete prescription histories, we specify and estimate a learning model in which doctors, initially uncertain about the quality differential between Omeprazole and the incumbent molecules, update their beliefs about this differential from first-hand experience after observing noisy signals from patients to whom they have prescribed the molecule. We find strong evidence that doctors' uncertainty about Omeprazole's quality is resolved by first-hand experience rather than through the pharmaceutical companies' marketing activities, so that learning through first-hand experience explains almost all of Omeprazole's diffusion path over our three-year sample period. This casts some doubt on previous researchers' findings, utilizing aggregate data, regarding the importance of marketing in securing market share for an entrant brand.
|Date of creation:||09 Oct 1998|
|Date of revision:|
|Contact details of provider:|| Postal: |
Phone: (416) 978-5283
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Bagwell, Kyle, 1990.
"Informational product differentiation as a barrier to entry,"
International Journal of Industrial Organization,
Elsevier, vol. 8(2), pages 207-223, June.
- Kyle Bagwell, 1986. "Informational Product Differentiation as a Barrier to Entry," Discussion Papers 711, Northwestern University, Center for Mathematical Studies in Economics and Management Science.
- Schmalensee, Richard., 1980.
"Product differentiation advantages of pioneering brands,"
1140-80., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- Schmalensee, Richard, 1982. "Product Differentiation Advantages of Pioneering Brands," American Economic Review, American Economic Association, vol. 72(3), pages 349-65, June.
- Levinsohn, James & Berry, Steven & Pakes, Ariel, 2004.
"Differentiated Products Demand Systems from a Combination of Micro and Macro Data: The New Car Market,"
3436404, Harvard University Department of Economics.
- Steven Berry & James Levinsohn & Ariel Pakes, 2004. "Differentiated Products Demand Systems from a Combination of Micro and Macro Data: The New Car Market," Journal of Political Economy, University of Chicago Press, vol. 112(1), pages 68-105, February.
- Steven Berry & James Levinsohn & Ariel Pakes, 1998. "Differentiated Products Demand Systems from a Combination of Micro and Macro Data: The New Car Market," NBER Working Papers 6481, National Bureau of Economic Research, Inc.
- Steven Berry & James Levinsohn & Ariel Pakes, 2001. "Differentiated Products Demand Systems from a Combination of Micro and Macro Data: The New Car Market," Cowles Foundation Discussion Papers 1337, Cowles Foundation for Research in Economics, Yale University.
- Ernst R. Berndt & Robert S. Pindyck & Pierre Azoulay, 1999.
"Network Effects and Diffusion in Pharmaceutical Markets: Antiulcer Drugs,"
NBER Working Papers
7024, National Bureau of Economic Research, Inc.
- Berndt, Ernst R. & Pindyck, Robert S. & Azoulay, Pierre, 1970-, 1998. "Network effects and diffusion in pharmaceutical markets : antiulcer drugs," Working papers WP 4059-98., Massachusetts Institute of Technology (MIT), Sloan School of Management.
When requesting a correction, please mention this item's handle: RePEc:tor:tecipa:mshum-98-03. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (RePEc Maintainer)
If references are entirely missing, you can add them using this form.