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The Market for High-Quality Medicine: Retail Chain Entry and Drug Quality in India

Author

Listed:
  • Daniel Bennett

    (University of Southern California)

  • Wesley Yin

    (University of California, Los Angeles)

Abstract

This study examines the effect of chain store entry on drug quality and prices in India. In contrast to prevailing mom-and-pop pharmacies, chains exploit scale economies in distribution and signaling to offer high-quality drugs at lower cost. We show that chain entry leads to a 5% improvement in drug quality and a 2% decrease in prices at incumbent retailers. Effects are larger for locally distributed drug brands but do not depend on consumer SES. Our findings suggest that in markets with asymmetric information, organizational technologies such as chains can play an important role translating market expansion into higher quality.

Suggested Citation

  • Daniel Bennett & Wesley Yin, 2019. "The Market for High-Quality Medicine: Retail Chain Entry and Drug Quality in India," The Review of Economics and Statistics, MIT Press, vol. 101(1), pages 76-90, March.
    • Handle: RePEc:tpr:restat:v:101:y:2019:i:1:p:76-90
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    Citations

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    Cited by:

    1. Juan Pablo Atal & José Ignacio Cuesta & Felipe González & Cristóbal Otero, 2024. "The Economics of the Public Option: Evidence from Local Pharmaceutical Markets," American Economic Review, American Economic Association, vol. 114(3), pages 615-644, March.
    2. Fitzpatrick, Anne, 2022. "The impact of public health sector stockouts on private sector prices and access to healthcare: Evidence from the anti-malarial drug market," Journal of Health Economics, Elsevier, vol. 81(C).
    3. Ajay Bhaskarabhatla & Priyatam Anurag & Chirantan Chatterjee & Enrico Pennings, 2021. "How Does Regulation Impact Strategic Repositioning by Firms Across Submarkets? Evidence from the Indian Pharmaceutical Industry," Strategy Science, INFORMS, vol. 6(3), pages 209-227, September.
    4. Chen, Xu & Li, Shanshan & Wang, Xiaojun, 2020. "Evaluating the effects of quality regulations on the pharmaceutical supply chain," International Journal of Production Economics, Elsevier, vol. 230(C).
    5. Francis Wafula & Chima Onoka & Anita Musiega & Arnold Okpani & Dosila Ogira & Ufuoma Ejughemre & Rosalind Miller & Catherine Goodman & Kara Hanson, 2022. "Healthcare clinic and pharmacy chains in Kenya and Nigeria: A qualitative exploration of the opportunities and risks they present for healthcare regulatory systems," International Journal of Health Planning and Management, Wiley Blackwell, vol. 37(6), pages 3329-3343, November.
    6. Yu Xia & Jing Li & Zhongyang Zhang, 2023. "Effects of price cap regulation on pharmaceutical supply chain under the zero markup drug policy," Operational Research, Springer, vol. 23(4), pages 1-27, December.
    7. Ana Moura & Pedro Pita Barros, 2020. "Entry and price competition in the over‐the‐counter drug market after deregulation: Evidence from Portugal," Health Economics, John Wiley & Sons, Ltd., vol. 29(8), pages 865-877, August.

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