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The Price Effects of Competition from Parallel Imports and Therapeutic Alternatives: Using Dynamic Models to Estimate the Causal Effect on the Extensive and Intensive Margins
Umeå University, Faculty of Social Sciences, Umeå School of Business and Economics (USBE), Economics.ORCID iD: 0000-0003-4467-8676
2022 (English)In: Review of Industrial Organization, ISSN 0889-938X, E-ISSN 1573-7160, Vol. 60, p. 63-92Article in journal (Refereed) Published
Abstract [en]

This paper studies responses to competition with the use of dynamic models that distinguish between short- and long-term price effects. The dynamic models also allow lagged numbers of competitors to become valid and strong instruments for the current numbers, which enables studying the causal effects using flexible specifications. A first parallel trader is found to decrease prices of exchangeable products by 7% in the long term. On the other hand, prices do not respond to the first competitor that sells therapeutic alternatives; but competition from four or more competitors that sell on-patent therapeutic alternatives decreases prices by about 10% in the long term.

Place, publisher, year, edition, pages
Springer, 2022. Vol. 60, p. 63-92
Keywords [en]
Brand-name drugs, Dynamic model, Parallel trade, Pharmaceutical industry, Price competition, Therapeutic competition
National Category
Economics
Research subject
Economics
Identifiers
URN: urn:nbn:se:umu:diva-186858DOI: 10.1007/s11151-021-09834-xISI: 000684477900003Scopus ID: 2-s2.0-85112363834OAI: oai:DiVA.org:umu-186858DiVA, id: diva2:1587480
Funder
Swedish Competition Authority, 382/2018Available from: 2021-08-24 Created: 2021-08-24 Last updated: 2022-08-30Bibliographically approved

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Granlund, David

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CiteExportLink to record
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Cite
Citation style
  • apa
  • ieee
  • modern-language-association-8th-edition
  • vancouver
  • Other style
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Language
  • de-DE
  • en-GB
  • en-US
  • fi-FI
  • nn-NO
  • nn-NB
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  • Other locale
More languages
Output format
  • html
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  • asciidoc
  • rtf