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Fictional drug for carpal tunnel syndrome

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Reference no: EM132559044

Bhattacharya and Vogt (2003) study the pricing strategies of pharmaceutical companies that bring new drugs to market. They observe that new drugs often debut at relatively low prices and get more expensive over time. They interpret this strategy as an attempt by the drug company to establish its drug in the minds of doctors and patients before trying to extract monopolistic profits.

Recall our fictional drug for carpal tunnel syndrome called BHTn1, which was introduced in Section 12.1.

Suppose demand for the new drug is:

Q = 1000 - P where P is the price that the monopolistic firm sets. What price will the firm choose to maximize profits = PQ?

We assume the cost of producing the drug is negligible.

Reference no: EM132559044

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