Strategic Entry Deterrence and the Behavior of Pharmaceutical Incumbents Prior to Patent Expiration
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Ellison_Strategic Entry.pdf
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Author(s)
Ellison, Glenn
Ellison, Sara F.
Date Issued
February 2011
Journal
American Economic Journal: Microeconomics
Publisher
American Economic Association
Citation
Ellison, Glenn, and Sara Fisher Ellison. “Strategic Entry Deterrence and the Behavior of Pharmaceutical Incumbents Prior to Patent Expiration.” American Economic Journal: Microeconomics 3.1 (2011): 1–36. Web. 1 June 2012.
Version
Final published version
Abstract
This paper develops a new approach to testing for strategic entry deterrence and applies it to the behavior of pharmaceutical incumbents before patent expiration. It examines a cross section of markets, determining whether behavior is nonmonotonic in market size. Under some conditions, investment levels will be monotone in market size if firms do not invest to deter entry. Strategic investments to deter entry, however, may result in nonmonotonic investment because they are unnecessary in small markets, and impossible in large ones. Consistent with an entry-deterrence motivation is the finding that incumbents in medium-sized markets advertise less prior to patent expiration. (JEL D92, G31, L11, L21, L65)
MIT Department
Massachusetts Institute of Technology. Department of Economics
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Article is made available in accordance with the publisher's policy and may be subject to US copyright law. Please refer to the publisher's site for terms of use.
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DOI of Published Version
https://doi.org/10.1257/mic.3.1.1
