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Download the Paper (280 K, PDF file) - August 1, 1995 Tell a colleague about it. Printing Tips: Select 'print as image' in the Acrobat print dialog if you have trouble printing.

ABSTRACT:
When a new firm enters a market and starts selling a spatially-differentiated product, the prices of existing products may rise due to a better match between consumers and products. Entry may have three unusual effects. First, the new price is above the monopoly price if the two firms collude and may be above the monopoly price even if the firms play Bertrand. Second, the Bertrand and collusive price may be identical. Third, prices, combined profits, and consumer surplus may all rise with entry. Consistent with our theory, the real prices of some anti-ulcer drugs rose as new products entered the market.

SUGGESTED CITATION:
Jeffrey M. Perloff, Valerie Y. Suslow, and Paul J. Seguin, "Higher Prices from Entry: Pricing of Brand-Name Drugs" (August 1, 1995). Competition Policy Center. Paper CPC99-003.
http://repositories.cdlib.org/iber/cpc/CPC99-003