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

Martina Björkman Nyqvist, Jakob Svensson and David Yanagizawa-Drott ()

No 9114, CEPR Discussion Papers from C.E.P.R. Discussion Papers

Abstract: 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.

Keywords: ACT; asymmetric information; counterfeit medicine; field experiment; Malaria (search for similar items in EconPapers)
JEL-codes: D83 I15 O12 (search for similar items in EconPapers)
Date: 2012-09
New Economics Papers: this item is included in nep-afr
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