Get access

ENTRY INTO PHARMACEUTICAL SUBMARKETS: A BAYESIAN PANEL PROBIT ANALYSIS

Authors

  • Gianni Amisano,

    Corresponding author
    1. DG-Research, European Central Bank, Frankfurt, Germany
    • Dipartimento di Economia, Management e Metodi Quantitativi, Università degli Studi di Milano
    Search for more papers by this author
  • Maria Letizia Giorgetti

    1. Dipartimento di Economia, Management e Metodi Quantitativi, Università degli Studi di Milano
    2. Università Cattolica del Sacro Cuore, Milano, Italy
    Search for more papers by this author

Correspondence to: Gianni Amisano, DG-Research, European Central Bank, Frankfurt, Germany.

E-mail: gianni.amisano@ecb.europa.eu

SUMMARY

We study entry into pharmaceutical submarkets by using a dynamic panel probit model. We develop a Bayesian version of Wooldridge's approach to dealing with unobserved heterogeneity. We distinguish between greenfield entry (entry with first product) and undifferentiated entry, which may take the form of introducing further products. We extend the standard reduced form model to consider company size in the submarket and across all submarkets. We find that greenfield and undifferentiated entries have different determinants, that global and submarket size measures have different effects and that sunk costs often have positive effects on entry due to a commitment mechanism. Copyright © 2012 John Wiley & Sons, Ltd.

Get access to the full text of this article

Ancillary