Multimarket contact in pharmaceutical markets
AbstractWe analyze the effect of multimarket contact on the pricing behavior of pharmaceutical firms controlling for different levels of regulatory constraints using the IMS MIDAS database for the industry. Theoretically, under product differentiation, firms may find it profitable to allocate their market power among markets where they are operating, specifically from more collusive to more competitive ones. We present evidence for nine OECD countries suggesting the existence of a multimarket effect for more market friendly countries (U.S. and Canada) and less regulated ones (U.K., Germany, Netherlands), while the results are more unstable for highly regulated countries with some countries being consistent with the theory (France) while others contradicting it (Japan, Italy and Spain). A key result indicates that in the latter countries, price constraints are so intense, that there is little room for allocating market power. Thus equilibrium prices are expected in general to be lower in regulated countries.
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Bibliographic InfoPaper provided by Department of Economics and Business, Universitat Pompeu Fabra in its series Economics Working Papers with number 1033.
Date of creation: Apr 2007
Date of revision: Jul 2007
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Web page: http://www.econ.upf.edu/
Pharmaceutical prices; Multimarket Contact; Regulation;
Other versions of this item:
- Javier Coronado & Sergi Jiménez-Martín & Pedro L. Marín, 2007. "Multimarket Contact in Pharmaceutical Markets," UFAE and IAE Working Papers 698.07, Unitat de Fonaments de l'Anàlisi Econòmica (UAB) and Institut d'Anàlisi Econòmica (CSIC), revised 18 Jul 2007.
- Javier Coronado & Sergi Jiménez-Martín & Pedro L. Marín, 2007. "Multimarket Contact in Pharmaceutical Markets," Working Papers 303, Barcelona Graduate School of Economics.
- Javier Coronado & Sergi Jiménez Martín & Pedro L. Marín, 2008. "Multimarket Contact in Pharmaceutical Markets," Working Papers 2008-20, FEDEA.
- L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
- L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
- L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology
- I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
This paper has been announced in the following NEP Reports:
- NEP-ALL-2007-05-19 (All new papers)
- NEP-COM-2007-05-19 (Industrial Competition)
- NEP-HEA-2007-05-19 (Health Economics)
- NEP-IND-2007-05-19 (Industrial Organization)
- NEP-MIC-2007-05-19 (Microeconomics)
- NEP-REG-2007-05-19 (Regulation)
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.:
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Economics Working Papers
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