Do Pharmacists Buy Bayer? Sophisticated Shoppers and the Brand Premium
Bart J. Bronnenberg
Tilburg University, CentER
University of Chicago - Booth School of Business
University of Chicago - Booth School of Business; National Bureau of Economic Research (NBER)
Jesse M. Shapiro
University of Chicago; National Bureau of Economic Research (NBER)
June 1, 2013
Chicago Booth Research Paper No. 14-17
We estimate the effect of information on consumers’ willingness to pay for branded goods in physically homogeneous consumer packaged goods categories. In a case study of headache remedies, we find that college education, working in a healthcare occupation, and other proxies for product knowledge predict more purchases of private labels relative to brands. Pharmacists devote almost 90 percent of headache remedy purchases to private labels, against 71 percent for the average consumer. The effect of knowledge is similar across a broad set of health products, and in a set of relatively homogeneous food products, but smaller for food and drink products overall. We conclude that a significant share of the willingness to pay for brands in these categories would disappear in a world where consumers were fully informed.
Number of Pages in PDF File: 46
Keywords: branding, private label, painkillers
JEL Classification: D12, D83, L66
Date posted: July 1, 2014
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