Strategic Entry Deterrence and the Behavior of Pharmaceutical Incumbents Prior to Patent Expiration
Author(s)
Ellison, Glenn; Ellison, Sara F.
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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)
Date issued
2011-02Department
Massachusetts Institute of Technology. Department of EconomicsJournal
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
ISSN
1945-7685
1945-7685