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Can Good Products Drive Out Bad? Evidence from Local Markets for (Fake?) Antimalarial Medicine in Uganda

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  • Björkman Nyqvist, Martina
  • Svensson, Jakob
  • Yanagizawa-Drott, David

Abstract

Counterfeit and sub-standard antimalarial drugs present a growing threat to public health. This paper investigates the mechanisms that determine the prevalence of fake antimalarial drugs in local markets, their effects, and potential interventions to combat the problem. We collect drug samples from a large set of local markets in Uganda using covert shoppers and employ Raman spectroscopy to test for drug quality. We find that 37 percent of the local outlets sell fake antimalarial drugs. Motivated by a simple model, we conduct a market-level experiment to test whether authentic drugs can drive out fake drugs from the local market. We find evidence of such externalities: the intervention reduced prevalence of substandard and counterfeit drugs in incumbent outlets by half. We also provide suggestive evidence that misconceptions about malaria lead consumers to overestimate antimalarial drug quality, and that opportunistic drug shops exploit these misconceptions by selling substandard and counterfeit drugs. Together, our results indicate that high quality products can drive out low quality ones, but the opposite is true when consumers are less able to infer product quality.

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Bibliographic Info

Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 9114.

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Date of creation: Sep 2012
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Handle: RePEc:cpr:ceprdp:9114

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Keywords: ACT; asymmetric information; counterfeit medicine; field experiment; Malaria;

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Cited by:
  1. Tessa Bold & Jakob Svensson, 2013. "Policies and Institutions for Effective Service Delivery: The Need of a Microeconomic and Micropolitical Approach," Journal of African Economies, Centre for the Study of African Economies (CSAE), vol. 22(suppl_2), pages -ii38, August.
  2. Jessica Cohen & Pascaline Dupas & Simone G. Schaner, 2012. "Price Subsidies, Diagnostic Tests, and Targeting of Malaria Treatment: Evidence from a Randomized Controlled Trial," NBER Working Papers 17943, National Bureau of Economic Research, Inc.
  3. Daniel Bennett & Wesley Yin, 2014. "The Market for High-Quality Medicine," NBER Working Papers 20091, National Bureau of Economic Research, Inc.

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