Abstract: The objective of this contribution is to explain how pharmaceutical innovation comes about and what its effects are in terms of both private and social costs and benefits. The paper will be divided into three parts. First, the incentives of a pharmaceutical firm to innovate are analyzed. Starting from the new theory of demand as developed by Becker [1] and Lancaster [6, 7], quality competition through product innovation is compared to price competition through process innovation. This theory can also be used to shed light on the pricing decisions of innovators and on how price regulation influences the balance between quality and price competition.
Publication Year: 1988
Publication Date: 1988-01-01
Language: en
Type: book-chapter
Indexed In: ['crossref']
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