BPEA | 1996: Microeconomics

Pharmaceutical Innovations and Market Dynamics: Tracking Effects on Price Indexes for Antidepressant Drugs

Ernst R. Berndt,
Ernst Berndt
Ernst R. Berndt Professor in Applied Economics Emeritus - MIT Sloan School of Management
Iain M. Cockburn, and
Iain M. Cockburn University of British Columbia and National Bureau of Economic Research
Zvi Griliches
Zvi Griliches Harvard University and National Bureau of Economic Research

Microeconomics 1996

THE CONSTRUCTION AND PUBLICATION of measures of price inflation are important tasks carried out by governmental statistical agencies. In the United States the Department of Labor’s Bureau of Labor Statistics (BLS) publishes price indexes measured at the point of final consumer demand (the consumer price index, CPI) and at the initial transaction point, that is, prices received by producers from whomever makes the first purchase (the producer price index, PPI). These price measurement tasks are difficult ones, particularly because new goods embody scientific discoveries and technological progress; inherent difficulties exist in measuring the output of services that themselves combine goods and time, and dynamic structural and compositional changes occur in the underlying markets for production, distribution, and sale.