Published In Economic Inquiry. Learning About New Products: An Empirical Study of PhysiciansBehavior

We develop and estimate a model of market demand for a new pharmaceutical, whose quality is learned through prescriptions by forward-looking physicians. We use a panel of anti-ulcer prescriptions from Italian physicians between 1990 and 1992 and focus on a new molecule available since 1990. We solve the model by calculating physi-ciansoptimal decision rules as functions of their beliefs about the new pharmaceu-tical. According to our counterfactuals, physiciansinitial pessimism and uncertainty can have large, negative e¤ects on their propensity to prescribe the new drug and on expected health outcomes. In contrast, subsidizing the new good can mitigate infor-mational losses