Public entry and private prices: New evidence from Indian pharmaceutical markets

Chirantan Chatterjee and Samarth Gupta

Journal of Economic Behavior & Organization, 2024, vol. 219, issue C, 473-489

Abstract: How do private firms respond to the entry of a vertically differentiated public firm? Answering this question can help design policies to balance redistribution against private-sector investment. In this paper, we study the pricing strategies of private-sector pharmacies after the entry of public-private dispensaries which sell discounted generic drugs. Public firm attracts away the quality agnostic consumers. The response of the private sector then depends on the underlying preferences of the residual market, composed of quality conscious consumers. We find that for drugs where this residual consumer is price sensitive, retail and wholesale prices in private firms decline in response to a shrinking market. For anti-cancer drugs, however, where quality conscious consumers are less likely to engage in price-shopping behavior, the private retailers increase prices which translate upstream as well. We also find that ex ante concentration of private players amplifies this impact. We conclude with some policy implications.

Keywords: Health care markets; Pricing; Mixed oligopolies (search for similar items in EconPapers)
JEL-codes: I11 L11 L22 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations:

Downloads: (external link)
http://www.sciencedirect.com/science/article/pii/S0167268124000350
Full text for ScienceDirect subscribers only

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:eee:jeborg:v:219:y:2024:i:c:p:473-489

DOI: 10.1016/j.jebo.2024.01.029

Access Statistics for this article

Journal of Economic Behavior & Organization is currently edited by Houser, D. and Puzzello, D.

More articles in Journal of Economic Behavior & Organization from Elsevier
Bibliographic data for series maintained by Catherine Liu ().