Entry in Pharmaceutical submarkets: A Bayesian Panel Probit Approach

In this paper we analyze entry dynamics in new submarkets of pharma- ceutical companies in the period 1987-1998 in seven countries considered as a single country and on each country separately. In particular we study entry decisions at time t in a new submarket, conditioned on the entrance or non-entrance in a new submarket at time t-1. Our analysis is based on a Bayesian approach which allows us to properly account for hetero- geneity among firms. We try to manage the inclusion among regressors of non strictly exogenous variables, which can be correlated with unobserved heterogeneity. Reassuming, the relevant variables are the achieved diver- sification indipendently of the size and other strategic variables connected with the attractiveness of each submarket. The unobservable heterogeneity is not explained by the lagged dependent variable but rather by the initial diversification.