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ENTRY INTO PHARMACEUTICAL SUBMARKETS: A BAYESIAN PANEL PROBIT ANALYSIS
Author(s) -
Amisano Gianni,
Giorgetti Maria Letizia
Publication year - 2012
Publication title -
journal of applied econometrics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 2.878
H-Index - 99
eISSN - 1099-1255
pISSN - 0883-7252
DOI - 10.1002/jae.2267
Subject(s) - probit model , probit , econometrics , bayesian probability , sunk costs , panel data , economics , multivariate probit model , barriers to entry , product (mathematics) , ordered probit , bayesian inference , microeconomics , statistics , mathematics , market structure , geometry
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.