Wednesday, November 28, 2018
Francesca Di Iorio (Department of Epolitical Sciences, University of Naples Federico II); Maria Letizia Giorgetti (Department of Economics, Management and Quantitative Methods, University of Milano) measure The impact of submarket concentration in the US pharmaceutical industry in 1987-1998.
ABSTRACT: Global market concentration is the result of the interplay of different sub-markets. According to this view, empirical analysis on the role of concentration as an incentive or as a barrier to entry must be conducted on a sub-market level, where the sub-markets are identified as specific technological trajectories. In this paper we investigate the role of 3-digit submarket concentration in the US pharmaceutical sector in 1987-1998. We take into account several sources of potential entry deterrence including the relative company size to the largest incumbent firm and the number of competing products in each submarket. The estimates of a panel logit model show that a concentrated industry at submarket level seems to act like a barrier to entry. The relative company size is not significant while the number of competing products is significantly positive.