nep-ind New Economics Papers
on Industrial Organization
Issue of 2014‒04‒05
two papers chosen by
Kwang Soo Cheong
Johns Hopkins University

  1. What drives the market share changes? price versus non-price factors By Benkovskis, Konstantins; Wörz, Julia
  2. Specialty Drug Prices and Utilization After Loss of U.S. Patent Exclusivity, 2001-2007 By Rena M. Conti; Ernst R. Berndt

  1. By: Benkovskis, Konstantins; Wörz, Julia
    Abstract: The paper proposes a theoretical framework for explaining gains and losses in export market shares by considering both price and non-price determinants. Starting from a demand-side model à la Armington (1969), we relax several restrictive assumptions to evaluate the contribution of unobservable changes in taste and quality, taking into account differences in elasticities of substitution across product markets. Using highly disaggregated trade data from UN Comtrade, our empirical analysis for the major world exporters (G7 and BRIC countries) reveals the dominant role of non-price factors in explaining the competitive gains of BRIC countries and concurrent decline in the G7’s share of world exports. JEL Classification: C43, F12, F14, L15
    Keywords: export market share decomposition, non-price competitiveness, real effective exchange rate
    Date: 2014–02
    URL: http://d.repec.org/n?u=RePEc:ecb:ecbwps:20141640&r=ind
  2. By: Rena M. Conti; Ernst R. Berndt
    Abstract: We examine the impact of loss of U.S. patent exclusivity (LOE) on the prices and utilization of specialty drugs between 2001 and 2007. We limit our empirical cohort to drugs commonly used to treat cancer and base our analyses on nationally representative data from IMS Health. We begin by describing the average number of manufacturers entering specialty drugs following LOE. We observe the number of firms entering the production of newly generic specialty drugs ranges between two and five per molecule in the years following LOE. However, the existence of time-varying and unobservable contract manufacturing practices complicates the definition of "manufacturers" entering the market. We use pooled data methods to examine whether the neoclassical relationship between price declines and volume increases upon LOE holds among these drugs. First, we examine the extent to which estimated prices of these drugs undergoing LOE fall with generic entry. Second, we estimate reduced form random effect models of utilization subsequent to LOE. We observe substantial price erosion after generic entry; average monthly price declines appear to be larger among physician-administered drugs (38-46.4%) compared to oral drugs (25-26%). Additionally, we find average prices for drugs produced by branded firms rise and prices for drugs produced by generic firms fall upon LOE; the latter effect is particularly large among oral drugs. In pooled models, volume appears to increase following generic entry, but this result appears to be largely driven by oral drugs. Molecule characteristics, number of manufacturers and 2007Q4 revenues are significant predictors of post-2007 drug shortages. We discuss second best welfare consequences of these results.
    JEL: D04 I11 I18 L11 L65
    Date: 2014–03
    URL: http://d.repec.org/n?u=RePEc:nbr:nberwo:20016&r=ind

This nep-ind issue is ©2014 by Kwang Soo Cheong. It is provided as is without any express or implied warranty. It may be freely redistributed in whole or in part for any purpose. If distributed in part, please include this notice.
General information on the NEP project can be found at http://nep.repec.org. For comments please write to the director of NEP, Marco Novarese at <director@nep.repec.org>. Put “NEP” in the subject, otherwise your mail may be rejected.
NEP’s infrastructure is sponsored by the School of Economics and Finance of Massey University in New Zealand.