Consumer Information and Pharmaceutical Prices: Theory and Evidence
AbstractIn this paper, the impact of increased information on brand name and generic pharmaceutical prices is analyzed both theoretically and empirically. The theoretical results show that an increase in information is likely to reduce the price of brand name pharmaceuticals, while the results regarding generics are less clear. In the empirical part of the paper, the introduction of the substitution reform in the Swedish pharmaceuticals market in October 2002 is used as a natural experiment regarding the effects of increased consumer information on pharmaceutical prices. The results clearly show that the reform has lowered the price of both brand name- and generic pharmaceuticals.
Download InfoIf you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
Bibliographic InfoPaper provided by HUI Research in its series HUI Working Papers with number 8.
Length: 32 pages
Date of creation: 01 Apr 2007
Date of revision:
Publication status: Published as Granlund, David and Niklas Rudholm, 'Consumer Information and Pharmaceutical Prices: Theory and Evidence' in Oxford Bulletin of Economics and Statistics, 2011, pages 230-254.
Contact details of provider:
Postal: HUI Research, Regeringsgatan 60, 103 29 Stockholm, Sweden
Phone: +46 (0)8 762 72 80
Fax: +46 (0)8 679 76 06
Web page: http://www.hui.se/
More information through EDIRC
Pharmaceutical industry; generic competition; generic drugs; brand name drugs;
Find related papers by JEL classification:
- D80 - Microeconomics - - Information, Knowledge, and Uncertainty - - - General
- D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search, Learning, and Information
- I11 - Health, Education, and Welfare - - Health - - - Analysis of Health Care Markets
- L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-05-26 (All new papers)
- NEP-COM-2007-05-26 (Industrial Competition)
- NEP-HEA-2007-05-26 (Health Economics)
- NEP-MKT-2007-05-26 (Marketing)
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Steven Salop & Joseph Stiglitz, 1977.
"Bargains and ripoffs: a model of monopolistically competitive price dispersion,"
Special Studies Papers
94, Board of Governors of the Federal Reserve System (U.S.).
- Salop, Steven & Stiglitz, Joseph E, 1977. "Bargains and Ripoffs: A Model of Monopolistically Competitive Price Dispersion," Review of Economic Studies, Wiley Blackwell, vol. 44(3), pages 493-510, October.
- Meir Statman, 1981. "The effect of patent expiration on the market position of drugs," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 2(2), pages 61-66, 06.
- Mats A. Bergman & Niklas Rudholm, 2003. "The Relative Importance of Actual and Potential Competition: Empirical Evidence From the Pharmaceuticals Market," Journal of Industrial Economics, Wiley Blackwell, vol. 51(4), pages 455-467, December.
- Alan T. Sorensen, 2000. "Equilibrium Price Dispersion in Retail Markets for Prescription Drugs," Journal of Political Economy, University of Chicago Press, vol. 108(4), pages 833-862, August.
- Diamond, Peter A., 1971. "A model of price adjustment," Journal of Economic Theory, Elsevier, vol. 3(2), pages 156-168, June.
- Nikas Rudholm, 2001. "Entry and the Number of Firms in the Swedish Pharmaceuticals Market," Review of Industrial Organization, Springer, vol. 19(3), pages 351-364, November.
- Granlund, David, 2008. "Does physicians' compensation affect the probability of their vetoing generic substitution?," UmeÃ¥ Economic Studies 729, Umeå University, Department of Economics, revised 26 Mar 2008.
- Granlund, David, 2010. "Price and welfare effects of a pharmaceutical substitution reform," Journal of Health Economics, Elsevier, vol. 29(6), pages 856-865, December.
- Granlund, David & Rudholm, Niklas, 2008. "Consumer Loyalty in the Swedish Pharmaceuticals Market," HUI Working Papers 17, HUI Research.
- Granlund, David, 2008. "Does Physicians' Compensation Affect the Probability of their Vetoing Generic Substitution?," HUI Working Papers 14, HUI Research.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Helena Nilsson).
If references are entirely missing, you can add them using this form.