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Generic Aversion and Observational Learning in the Over-the-Counter Drug Market

Author

Listed:
  • Mariana Carrera
  • Sofia Villas-Boas

Abstract

Through a labeling intervention at a national retailer, we test three hypotheses for consumer aversion to generic over-the-counter drugs: lack of information on the comparability of generic and brand drugs, inattention to their price differences, and uncertainty about generic quality that can be reduced with information on peer purchase rates. With a difference-in-differences strategy, we find that posted information on the purchases of other customers increases generic purchase shares significantly, while other treatments have mixed results. Consumers without prior generic purchases appear particularly responsive to this information. These findings have policy implications for promoting evidence-based, cost-effective choices.

Suggested Citation

  • Mariana Carrera & Sofia Villas-Boas, 2023. "Generic Aversion and Observational Learning in the Over-the-Counter Drug Market," American Economic Journal: Applied Economics, American Economic Association, vol. 15(3), pages 380-410, July.
    • Handle: RePEc:aea:aejapp:v:15:y:2023:i:3:p:380-410
    DOI: 10.1257/app.20200867
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    Citations

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    Cited by:

    1. Janssen, Aljoscha & Granlund, David, 2023. "The importance of the first generic substitution: Evidence from Sweden," Journal of Economic Behavior & Organization, Elsevier, vol. 213(C), pages 1-25.
    2. Hjalmarsson, Linn & Schmid, Christian P.R. & Schreiner, Nicolas, 2024. "A Prescription for Knowledge: Patient Information and Generic Substitution," Working papers 2024/05, Faculty of Business and Economics - University of Basel.
    3. Ata Jameei Osgouei & Andrew T. Ching & Brian T. Ratchford & Shervin Shahrokhi Tehrani, 2026. "Estimating Position and Social Influence Effects in Online Search," Marketing Science, INFORMS, vol. 45(1), pages 203-223, January.
    4. Haruo Kakehi & Ryo Nakajima, 2024. "Role of Pharmacists in Generic Pharmaceutical Adoption," Keio-IES Discussion Paper Series 2024-015, Institute for Economics Studies, Keio University.
    5. Carly Trachtman & Molly Dop & Sofia Villas-Boas, 2019. "Understanding the Influence of Brand Information in Online Purchase Decisions for Health Products," Springer Proceedings in Business and Economics, in: Francisco J. Martínez-López & Juan Carlos Gázquez-Abad & Anne Roggeveen (ed.), Advances in National Brand and Private Label Marketing, pages 197-204, Springer.

    More about this item

    JEL classification:

    • D12 - Microeconomics - - Household Behavior - - - Consumer Economics: Empirical Analysis
    • D83 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Search; Learning; Information and Knowledge; Communication; Belief; Unawareness
    • L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology; Plastics
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising

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