Consumer Learning and the Entry of Generic Pharmaceuticals
Jeffrey S. McCullough and
No 23662, NBER Working Papers from National Bureau of Economic Research, Inc
Generic pharmaceuticals provide low-cost access to treatment. Despite their chemical equivalence to branded products, many mechanisms may hinder generic substitution. Consumers may be unaware of their equivalence. Firms may influence consumers through advertising or product line extensions. We estimate a structural model of pharmaceutical demand where consumers learn about stochastic match qualities with specific drugs. Naïve models, without consumer heterogeneity and learning, grossly underestimate demand elasticities. Consumer bias against generics critically depends on experience. Advertising and line extensions yield modest increases in branded market shares. These effects are dominated by consumers’ initial perception bias against generics.
JEL-codes: I1 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com, nep-hea and nep-mkt
Note: HC HE IO
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2) Track citations by RSS feed
Downloads: (external link)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:nbr:nberwo:23662
Ordering information: This working paper can be ordered from
Access Statistics for this paper
More papers in NBER Working Papers from National Bureau of Economic Research, Inc National Bureau of Economic Research, 1050 Massachusetts Avenue Cambridge, MA 02138, U.S.A.. Contact information at EDIRC.
Bibliographic data for series maintained by ().