Abstract
The effect of price regulation on generic market entry and welfare in the presence of (persuasive) advertising is analysed. An incumbent has the possibility to invest in advertising targeted at the physician. Advertising creates vertical product differentiation between brand-name drugs and its generic substitutes. This differentiation creates the possibility to make positive profits for both firms. The presence of price regulation, however, reduces the anticipated generic profits. If price regulation is too strict, then the generic firm will refrain from market entry. Hence, the model confirms the empirical observation that generic market shares are lower in countries with strict price regulation. (JEL: I11, L13) Copyright 2006, Oxford University Press.
Sign-in/Register to access full text options 
Talk to us
Join us for a 30 min session where you can share your feedback and ask us any queries you have
Schedule a callDisclaimer: All third-party content on this website/platform is and will remain the property of their respective owners and is provided on "as is" basis without any warranties, express or implied. Use of third-party content does not indicate any affiliation, sponsorship with or endorsement by them. Any references to third-party content is to identify the corresponding services and shall be considered fair use under The CopyrightLaw.
