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The Relative Importance of Actual and Potential Competition: Empirical Evidence From the Pharmaceuticals Market

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  • Mats A. Bergman
  • Niklas Rudholm

Abstract

We study actual and potential competition and other factors that determine price paths of brand‐name drugs in the Swedish pharmaceuticals market. The results indicate that the price of the incumbent product is lowered by potential competition, entry of (additional) generics, and the introduction of a so‐called reference‐price system. We also identify a ‘ratchet’ effect, through which price regulation makes entry‐deterring limit‐pricing credible.

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  • 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.
    • Handle: RePEc:bla:jindec:v:51:y:2003:i:4:p:455-467
    DOI: 10.1111/j.0022-1821.2003.00210.x
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