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

See all articles by Andrew T. Ching

Andrew T. Ching

Johns Hopkins University - Carey Business School

David Granlund

University of Umea

David Sundström

University of Umea

Date Written: May 2, 2019

Abstract

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

Suggested Citation

Ching, Andrew T. and Granlund, David and Sundström, David, Zero, Not Always a Special Price: 330,000 Consumer Drug Choices Give No Support for the Zero-price Effect (May 2, 2019). Available at SSRN: https://ssrn.com/abstract=3386685 or http://dx.doi.org/10.2139/ssrn.3386685

Andrew T. Ching (Contact Author)

Johns Hopkins University - Carey Business School ( email )

100 International Drive
Baltimore, MD 21202
United States

David Granlund

University of Umea ( email )

Samhallsvetarhuset, Plan 2
Umea University
UmeƄ, SE 901 87
Sweden

David Sundström

University of Umea ( email )

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