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Can Good Products Drive Out Bad? Evidence from Local Markets for (Fake?) Antimalarial Medicine in Uganda

  • Björkman Nyqvist, Martina
  • Svensson, Jakob
  • Yanagizawa-Drott, David

Counterfeit and sub-standard antimalarial drugs present a growing threat to public health. This paper investigates the mechanisms that determine the prevalence of fake antimalarial drugs in local markets, their effects, and potential interventions to combat the problem. We collect drug samples from a large set of local markets in Uganda using covert shoppers and employ Raman spectroscopy to test for drug quality. We find that 37 percent of the local outlets sell fake antimalarial drugs. Motivated by a simple model, we conduct a market-level experiment to test whether authentic drugs can drive out fake drugs from the local market. We find evidence of such externalities: the intervention reduced prevalence of substandard and counterfeit drugs in incumbent outlets by half. We also provide suggestive evidence that misconceptions about malaria lead consumers to overestimate antimalarial drug quality, and that opportunistic drug shops exploit these misconceptions by selling substandard and counterfeit drugs. Together, our results indicate that high quality products can drive out low quality ones, but the opposite is true when consumers are less able to infer product quality.

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Paper provided by C.E.P.R. Discussion Papers in its series CEPR Discussion Papers with number 9114.

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Date of creation: Sep 2012
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Handle: RePEc:cpr:ceprdp:9114
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  1. Bate, Roger & Jin, Ginger Zhe & Mathur, Aparna, 2011. "Does price reveal poor-quality drugs? Evidence from 17 countries," Journal of Health Economics, Elsevier, vol. 30(6), pages 1150-1163.
  2. Jeremy Barofsky & Claire Chase & Tobenna Anekwe & Farshad Farzadfar, 2011. "The Economic Effects of Malaria Eradication: Evidence from an Intervention in Uganda," PGDA Working Papers 7011, Program on the Global Demography of Aging.
  3. Michael Kremer & Edward Miguel, 2007. "The Illusion of Sustainability," The Quarterly Journal of Economics, MIT Press, vol. 122(3), pages 1007-1065, 08.
  4. Jessica Cohen & Pascaline Dupas & Simone Schaner, 2015. "Price Subsidies, Diagnostic Tests, and Targeting of Malaria Treatment: Evidence from a Randomized Controlled Trial," American Economic Review, American Economic Association, vol. 105(2), pages 609-45, February.
  5. Hoyt Bleakley, 2010. "Malaria Eradication in the Americas: A Retrospective Analysis of Childhood Exposure," American Economic Journal: Applied Economics, American Economic Association, vol. 2(2), pages 1-45, April.
  6. Das, Jishnu & Hammer, Jeffrey & Leonard, Kenneth, 2008. "The quality of medical advice in low-income countries," Policy Research Working Paper Series 4501, The World Bank.
  7. Kremer, Michael, 1993. "The O-Ring Theory of Economic Development," The Quarterly Journal of Economics, MIT Press, vol. 108(3), pages 551-75, August.
  8. Milgrom, Paul & Roberts, John, 1986. "Price and Advertising Signals of Product Quality," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 796-821, August.
  9. Wolinsky, Asher, 1983. "Prices as Signals of Product Quality," Review of Economic Studies, Wiley Blackwell, vol. 50(4), pages 647-58, October.
  10. Akerlof, George A, 1970. "The Market for 'Lemons': Quality Uncertainty and the Market Mechanism," The Quarterly Journal of Economics, MIT Press, vol. 84(3), pages 488-500, August.
  11. Alan Barreca, 2009. "The Long-Term Economic Impact of In Utero and Postnatal Exposure to Malaria," Working Papers 0905, Tulane University, Department of Economics.
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