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Innovation and Market Dynamics in the EPO Market
By Sorisio, Enrico and Steinar Strøm
Memorandum 12/2006
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Abstract |
We have estimated the demand of erythropoietin (EPO) on market data from the Nordic
countries. Assuming that prices are set in a Nash-Bertrand game we determine the degree
of competition in this Nordic market. We also report the impact of product innovation on
welfare, e.g on consumer and producer surplus. The product innovation is the entry of
Aranesp in the Nordic market. We find a positive effect related to the introduction of
Aranesp in the EPO market. The high increase in consumer surplus however seems not to
be accompanied by a great increase in producer surplus, whose growth is slight. Some
time after the introduction of the innovation, the surplus growth does not seem to
increase, it remains more or less the same (or decreases a bit). An important conclusion in
our paper is that although there are few firms competing in the Nordic market for EPO,
the estimated long run market power is low. |
| JEL Classification:
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C35, D43, I18, L11 |
| Keywords:
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Discrete choice, demand for pharmaceuticals, monopolistic competition, EPO |
| Project:
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4104 The market for Pharmaceuticals
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