ABSTRACT
All markets, in any industry, commence their existence with the introduction by a firm of a product or service to meet previously unfulfilled demand. The introduction of new products involves expenditures that produce common benefits for each market where the products are sold. Common costs are fixed costs, and the amount of such costs depends on technical complexities and risks involved in introducing a new product to the market. In the industry there is rivalry for market share among highly innovative products which enable the firms that produce them to earn above-average rates of profit relative to the producers of homogenous products. This chapter focuses on the South African pharmaceutical industry, aiming to establish whether the industry can indeed be regarded as competitive at a time when the South African Competition Board and government are skeptical of this. The South African Competition Board believes that the industry possesses significant monopoly power and that this impedes price competition between firms.
