Multimarket Contact in Pharmaceutical Markets
The purpose of this paper is to analyze the effect of multimarket contact on the behavior of pharmaceutical firms controlling for different levels of regulatory constraints using IMS MIDAS database. Theoretically, firms that meet in several markets are expected to be capable of sustaining implicitly more profitable out- comes, even if perfect monitoring is not possible. Firms may find it profitable to redistribute their market power among markets where they are operating. We present evidence for nine OECD countries with different degrees of regulation and show that regulation affects the importance of economic forces on firms' price setting behavior. Furthermore, our results confirms the presence of the predictions of the multimarket theory for more market friendly countries (U.S. and Canada) and less regulated ones (U.K., Germany, Netherlands), in contrast, for highly regulated countries (Japan, France, Italy and Spain) the results are less clear with some countries being consistent with the theory while others contradicting it.
|Date of creation:||Apr 2007|
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Elsevier, vol. 98(1), pages 158-178, May.
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Working Papers, Research Center on Health and Economics
662, Department of Economics and Business, Universitat Pompeu Fabra.
- Antonio Cabrales, 2003. "Pharmaceutical Generics, Vertical Product Differentiation, and Public Policy," Working Papers 54, Barcelona Graduate School of Economics.
- Antonio Cabrales, 2003. "Pharmaceutical generics, vertical product differentiation and public policy," Economics Working Papers 662, Department of Economics and Business, Universitat Pompeu Fabra.
- Chang, Myong-Hun, 1991. "The effects of product differentiation on collusive pricing," International Journal of Industrial Organization, Elsevier, vol. 9(3), pages 453-469, September.
- Scott, John T, 1982. "Multimarket Contact and Economic Performance," The Review of Economics and Statistics, MIT Press, vol. 64(3), pages 368-75, August.
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