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Reference pricing and parallel imports: Evidence from Germany

Laura Birg

No 362, Center for European, Governance and Economic Development Research Discussion Papers from University of Goettingen, Department of Economics

Abstract: I study the effect of reference pricing on competition by parallel imports, in particular the market share of parallel imports and the number of parallel traders. First, I analyze the effect of reference pricing on competition by parallel imports in a vertical differentiation model with a locally sourced version and a parallel import offered by n identical parallel traders. Second, I explore the effect of reference pricing on competition by parallel imports using a dataset with prescription drugs with competition from parallel imports. Both model and estimation results suggest that the introduction of reference pricing inreases the market share of the parallel import and the number of parallel traders, while a decrease in the reference price decreases the market share of the parallel import and the number of parallel traders.

Keywords: reference pricing; parallel imports; pharmaceutical regulation (search for similar items in EconPapers)
JEL-codes: F12 I11 I18 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-com
Date: 2019
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