TY  - JOUR
AU  - Berndt,Ernst R.
AU  - Pindyck,Robert S.
AU  - Azoulay,Pierre
TI  - Network Effects and Diffusion in Pharmaceutical Markets:  Antiulcer Drugs
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 7024
PY  - 1999
Y2  - March 1999
UR  - http://www.nber.org/papers/w7024
L1  - http://www.nber.org/papers/w7024.pdf
N1  - Author contact info:
Ernst R. Berndt
MIT Sloan School of Management
100 Main Street, E62-518
Cambridge, MA 02142
Tel: 617/253-2665
Fax: 617-227-0880
E-Mail: eberndt@mit.edu

Robert S. Pindyck
MIT Sloan School of Management
100 Main Street, E62-522
Cambridge, MA  02142
Tel: 617/253-6641
Fax: 617/258-6855
E-Mail: RPINDYCK@MIT.EDU

Pierre Azoulay
MIT Sloan School of Management
100 Main Street, E62-482
Cambridge, MA 02142
Tel: 617/258-9766
Fax: 617/253-2660
E-Mail: pazoulay@mit.edu
AB  - We examine the role of network effects in the demand for pharmaceuticals at both the brand level and for a therapeutic class of drugs.  These effects emerge when use of a drug by others conveys information about its efficacy and safety to patients and physicians.  This can lead to herd behavior where a particular drug -- not necessarily the most efficacious or safest -- can come to dominate the market despite the availability of close substitutes, and can also affect the rate of market diffusion.  Using data for H2-antagonist antiulcer drugs, we examine two aspects of these effects.  First, we use hedonic price procedures to estimate how the aggregate usage of a drug affects brand valuation.  Second, we estimate discrete-time diffusion models at both the industry and brand levels to measure the impact on rates of diffusion and market saturation.
ER  -