IDEAS home Printed from https://ideas.repec.org/a/wly/soecon/v76y2009i2p351-374.html
   My bibliography  Save this article

Pharmaceutical Patents: Incentives for Research and Development or Marketing?

Author

Listed:
  • Kurt R. Brekke
  • Odd Rune Straume

Abstract

We analyze how a patent‐holding pharmaceutical firm may strategically use advertising of existing drugs to affect research and development (R&D) investments in new (differentiated) drugs, and thereby affect the probability distribution of future market structures in the industry. Within a fairly general model framework, we derive exact conditions for advertising and R&D being substitute strategies for the incumbent firm and show that it may overinvest in advertising to reduce the incentive for an entrant to invest in R&D, thereby reducing the probability of a new product on the market. In a more specific setting of informative advertising, we show that such overinvestment incentives are always present and that more generous patent protection implies that a larger share of the patent rent is spent on marketing, relative to R&D.

Suggested Citation

  • Kurt R. Brekke & Odd Rune Straume, 2009. "Pharmaceutical Patents: Incentives for Research and Development or Marketing?," Southern Economic Journal, John Wiley & Sons, vol. 76(2), pages 351-374, October.
    • Handle: RePEc:wly:soecon:v:76:y:2009:i:2:p:351-374
    DOI: 10.4284/sej.2009.76.2.351
    as

    Download full text from publisher

    File URL: https://doi.org/10.4284/sej.2009.76.2.351
    Download Restriction: no
    File URL: https://libkey.io/10.4284/sej.2009.76.2.351?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    More about this item

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:wly:soecon:v:76:y:2009:i:2:p:351-374. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    We have no bibliographic references for this item. You can help adding them by using this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Wiley Content Delivery (email available below). General contact details of provider: https://doi.org/10.1002/(ISSN)2325-8012 .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.