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LEARNING ABOUT NEW PRODUCTS: AN EMPIRICAL STUDY OF PHYSICIANS' BEHAVIOR

Authors

  • MARIA MARTA FERREYRA,

    1. Ferreyra: Tepper School of Business, Carnegie Mellon University, Pittsburgh, PA 15213. Phone 412 268 1829 Fax 412 268 7357, E-mail mferrey@andrew.cmu.edu
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  • GRIGORY KOSENOK

    1. Kosenok: New Economic School, Moscow, Russia. Phone 7 499 129 1700 ext. 251, Fax 7 499 129 3722, E-mail gkosenok@nes.ru
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    • We thank Peter Arcidiacono, Daniele Coen-Pirani, Eric French, George-Levy Gayle, Marty Gaynor, Ron Goettler, Susumu Imai, Ken Judd, Yuichi Kitamura, Steve Lehrer, Robert Miller, Alvin Murphy, Sridhar Narayanan, Mark Roberts, Marc Rysman, and especially Phil Haile for helpful comments on various versions of this paper. Seminar participants at Carnegie Mellon, the New Economic School, Queen's, Stanford, Washington University and Wisconsin, and participants at the 2009 Summer Meetings of the Econometric Society also made valuable comments. We gratefully acknowledge Jeff Reminga's assistance with the computational aspects of this project, and Alexander Migita's research assistance. We especially thank Matthew Shum and Andrea Coscelli for giving us access to the data. All errors are ours.


Abstract

We develop and estimate a model of market demand for a new pharmaceutical, whose quality is learned through prescriptions by forward-looking physicians. We use a panel of antiulcer prescriptions from Italian physicians between 1990 and 1992 and focus on a new molecule available since 1990. We solve the model by calculating physicians' optimal decision rules as functions of their beliefs about the new pharmaceutical. According to our counterfactuals, physicians' initial pessimism and uncertainty can have large, negative effects on their propensity to prescribe the new drug and on expected health outcomes. In contrast, subsidizing the new good can mitigate informational losses. (JEL I10, L10)

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