1. Assume that promotional intensity and market share data refer to a representative sample of firms marketing patented and branded prescription drugs. Assume further that producers of generic drugs enter the market immediately after the patent for the branded drug expires and offer their products at cut-rate prices. Based on our class discussion of the chart and relevant readings, explain the following:

a) Promotional strategy of patented and branded prescription drug firms suggested by the promotional intensity line in the chart. Your answer must include the meaning of promotional intensity and R&D intensity.

b) What do the market share databefore and after the patent expires-- shown in the chart tell us about the pricing strategy of branded prescription drug firms in response to post-patent price competition from firms producing generic drugs? With the aid of clearly labeled demand curves explain how the response of branded drug firms varies among different segments of the market?