Zero, Not Always a Special Price: 330,000 Consumer Drug Choices Give No Support for the Zero-price Effect
21 Pages Posted: 3 Jun 2019 Last revised: 29 Feb 2020
Date Written: May 2, 2019
We use Swedish data on 330,000 consumer choices of medically equivalent drugs to study the zero-price effect first documented by Shampanier et al. (2007) in experimental settings. The Swedish benefit scheme implies that, during a given month, all consumers face the same price-differences between generic substitutes and that about a fifth of the consumers pay a zero price if they choose the cheapest substitute. Using both regression discontinuity designs and discrete choice models, we find no evidence for the zero-price effect in our study.
Keywords: Zero-price effect; free; behavioral pricing; pharmaceuticals; prescription drugs; generic drugs
JEL Classification: D12; D90; I11; I13; M31
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