Scandinavian Working Papers in Economics
Memorandum,
Oslo University, Department of Economics
No 12/2006: Innovation and market dynamics in the EPO market
Enrico Sorisio () and Steinar Strøm ()
Additional contact information
Enrico Sorisio: Neuroscienze PharmaNess scarl, Postal: Edificio 5 - Parco Scientifico, e Tecnologico Polaris, località Piscinamanna, 09010 Pula (CA)
Steinar Strøm: Dept. of Economics, University of Oslo, Postal: Department of Economics, University of Oslo, P.O Box 1095 Blindern, N-0317 Oslo, Norway
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.
Keywords: Discrete choice; demand for pharmaceuticals; monopolistic competition; EPO
32 pages, June 9, 2006
Full text files
Memo-12-2006.pdf
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