IDEAS home Printed from https://ideas.repec.org/p/hhs/huiwps/0096.html
   My bibliography  Save this paper

Defining Relevant Product Markets for Pharmaceuticals

Author

Listed:
  • Mihaescu, Oana

    (HUI Research)

  • Rudholm, Niklas

    (HUI Research)

Abstract

To identify the relevant product markets for Swedish pharmaceuticals, a spatial econometrics approach is employed. First, we calculate Moran’s Is for different market definitions and then we use a spatial Durbin model to determine the effect of price changes on quantity sold off own and competing products. As expected, the results show that competition is strongest between close substitutes; however, the relevant product markets for Swedish pharmaceuticals extend beyond close substitutes down to products included in the same class on the four-digit level of the Anatomic Therapeutic Chemical system as defined by the World Health Organization. The spatial regression model further indicates that increases in the price of a product significantly lower the quantity sold of that product and in the same time increase the quantity sold of competing products. For close substitutes (products belonging to the same class on the seven-digit level of the Anatomic Therapeutic Chemical system), as well as for products that, without being close substitutes, belong to the same therapeutic/pharmacological/chemical subgroup (the same class on the five-digit level of the Anatomic Therapeutic Chemical system), a significant change towards increased competition is also visible after 1 July 2009 when the latest policy changes with regards to pharmaceuticals have been implemented in Sweden.

Suggested Citation

  • Mihaescu, Oana & Rudholm, Niklas, 2013. "Defining Relevant Product Markets for Pharmaceuticals," HUI Working Papers 96, HUI Research.
    • Handle: RePEc:hhs:huiwps:0096
    as

    Download full text from publisher

    File URL: http://www.hui.se/BinaryLoader.axd?OwnerID=3a577059-d869-4d1b-bff1-5673eefc3461&OwnerType=0&PropertyName=EmbeddedFile_c41f689e-df01-4a9f-af45-593fb5d4ea68&FileName=HUIwp96.pdf&Attachment=True
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. Alan T. Sorensen, 2000. "Equilibrium Price Dispersion in Retail Markets for Prescription Drugs," Journal of Political Economy, University of Chicago Press, vol. 108(4), pages 833-862, August.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Salvador Gil-Pareja & Simón Sosvilla-Rivero, 2004. "Export Market Integration in the European Union," Journal of Applied Economics, Taylor & Francis Journals, vol. 7(2), pages 271-301, November.
    2. Edgardo Arturo Ayala Gaytán, 2009. "Social network externalities and price dispersion in online markets," Ensayos Revista de Economia, Universidad Autonoma de Nuevo Leon, Facultad de Economia, vol. 0(2), pages 1-28, November.
    3. David Bardey & Denis Gromb & David Martimort & Jérôme Pouyet, 2016. "Drugs, Showrooms and Financial Products: Competition and Regulation when Sellers Provide Expert Advice," PSE Working Papers halshs-01400841, HAL.
    4. Bergman , Mats A. & Granlund, David & Rudholm, Niklas, 2016. "Squeezing the last drop out of your suppliers: an empirical study of market-based purchasing policies for generic pharmaceuticals," Umeå Economic Studies 921, Umeå University, Department of Economics.
    5. Guido Menzio & Nicholas Trachter, 2018. "Equilibrium Price Dispersion Across and Within Stores," Review of Economic Dynamics, Elsevier for the Society for Economic Dynamics, vol. 28, pages 205-220, April.
    6. Burdett, Ken & Smith, Eric, 2010. "Price distributions and competition," Economics Letters, Elsevier, vol. 106(3), pages 180-183, March.
    7. Greg Kaplan & Guido Menzio, 2016. "Shopping Externalities and Self-Fulfilling Unemployment Fluctuations," Journal of Political Economy, University of Chicago Press, vol. 124(3), pages 771-825.
    8. Walter Beckert, 2018. "An Empirical Analysis of Countervailing Power in Business-to-Business Bargaining," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 52(3), pages 369-402, May.
    9. Hélène Desgagnés, 2017. "The Rise of Non-Regulated Financial Intermediaries in the Housing Sector and its Macroeconomic Implications," Staff Working Papers 17-36, Bank of Canada.
    10. Michael R. Baye & John Morgan & Patrick Scholten, 2004. "Price Dispersion In The Small And In The Large: Evidence From An Internet Price Comparison Site," Journal of Industrial Economics, Wiley Blackwell, vol. 52(4), pages 463-496, December.
    11. Esther Atukunda & Anne Fitzpatrick, 2015. "An Evaluation of Factors Affecting Drug Quality: Evidence from the Antimalarial Market in Uganda," Working Papers 2015_03, University of Massachusetts Boston, Economics Department.
    12. Rafael R. Guthmann, 2024. "Price dispersion in dynamic competition," Economic Theory, Springer;Society for the Advancement of Economic Theory (SAET), vol. 78(4), pages 1203-1232, December.
    13. Joshua Sherman & Avi Weiss, 2017. "On Fruitful And Futile Tests Of The Relationship Between Search And Price Dispersion," Economic Inquiry, Western Economic Association International, vol. 55(4), pages 1898-1918, October.
    14. Ajay Bhaskarabhatla & Priyatam Anurag & Chirantan Chatterjee & Enrico Pennings, 2021. "How Does Regulation Impact Strategic Repositioning by Firms Across Submarkets? Evidence from the Indian Pharmaceutical Industry," Strategy Science, INFORMS, vol. 6(3), pages 209-227, September.
    15. N. Berardi & P. Sevestre & J. Thébault, 2017. "The Determinants of Consumer Price Dispersion: Evidence from French Supermarkets," Working papers 632, Banque de France.
    16. Meghan R. Busse & Ayelet Israeli & Florian Zettelmeyer, 2013. "Repairing the Damage: The Effect of Price Expectations on Auto-Repair Price Quotes," NBER Working Papers 19154, National Bureau of Economic Research, Inc.
    17. Solomon W. Polachek & Jun (Jeff) Xiang, 2006. "The Effects of Incomplete Employee Wage Information: A Cross-Country Analysis," Research in Labor Economics, in: The Economics of Immigration and Social Diversity, pages 35-75, Emerald Group Publishing Limited.
    18. Joachim Kaldasch, 2015. "Dynamic Model of the Price Dispersion of Homogeneous Goods," Papers 1509.01216, arXiv.org.
    19. Ya-Ling Chiu & Jiangze Du & Jying-Nan Wang, 2022. "The Effects of Price Dispersion on Sales in the Automobile Industry: A Dynamic Panel Analysis," SAGE Open, , vol. 12(3), pages 21582440221, August.
    20. Aparajita Goyal, 2010. "Information, Direct Access to Farmers, and Rural Market Performance in Central India," American Economic Journal: Applied Economics, American Economic Association, vol. 2(3), pages 22-45, July.

    More about this item

    Keywords

    market delineation; competition; horizontal merger guidelines; spatial Durbin model; market reform;
    All these keywords.

    JEL classification:

    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms
    • L25 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Firm Performance
    • L26 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Entrepreneurship
    • L81 - Industrial Organization - - Industry Studies: Services - - - Retail and Wholesale Trade; e-Commerce

    Statistics

    Access and download statistics

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:hhs:huiwps:0096. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Hans Seerar Westerberg (email available below). General contact details of provider: https://edirc.repec.org/data/huistse.html .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.