Markups on Drop-Downs: Prominence in Pharmaceutical Markets∗

Frederik Plum Hauschultz and Anders Munk-Nielsen

MPRA Paper from University Library of Munich, Germany

Abstract: We study the effect of product prominence in consumer search on demand and equilibrium prices using data from Danish pharmaceutical markets. Variation in prominence comes from alphabetical ordering in physician IT-systems. We find that both prescriptions, prices, market shares and revenue decrease in alphabetical rank. We estimate a structural ordered search model which confirms that physicians actively search. They react to patient expenditures, albeit less than patients, and increase search effort for low-income and female patients. Sorting products by price would reduce equilibrium expenditures by 5%, which is more than a removal of search frictions would achieve.

Keywords: Ordered search; pharmaceuticals; market power; prominence. (search for similar items in EconPapers)
JEL-codes: D12 D83 L13 (search for similar items in EconPapers)
Date: 2020-12-01
New Economics Papers: this item is included in nep-com, nep-eur and nep-ind
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Persistent link: https://EconPapers.repec.org/RePEc:pra:mprapa:104582

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