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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. Copyright Blackwell Publishing Ltd. 2003.

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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
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