an induced innovation externality. This alternative mechanism, by contrast, causes people to devote an inefficiently high … level of self-protection. As an empirical example of this externality, we analyze the innovation induced by the obesity … epidemic. Obesity is associated with an increase in the incidence of many diseases. The induced innovation hypothesis is that …

opportunities. The paper also provides new evidence on induced pharmaceutical innovation. In both cases we use the change in the … demographic structure of the market (measured by age structure and obesity prevalence) to test the induced innovation hypothesis … pharmaceutical innovation responds to aging- and obesity-induced changes in potential market size …

diseases and consumption of treatments to those diseases. This increases the reward for innovation and thus benefits the … innovator. It also increases treatment innovation which benefits all consumers. As individuals do not take these positive … externality for obesity. The lower bound is independent of how much additional innovation is generated. The results show that the …