Price Dynamics of Swedish Pharmaceuticals
43 Pages Posted: 3 Aug 2020
Date Written: June 1, 2020
This paper investigates price patterns of off-patent pharmaceuticals in Sweden. I show that price dynamics are dependent on the number of competitors in the market. The price patterns follow predictions from a model of dynamic price competition in which the demand for pharmaceuticals incorporates the known biases of consumers: habit persistence and brand preferences. Using the regulated market of Swedish pharmaceuticals, I show that price dynamics may help in identifying possible tacit collusion by manufacturers in markets where consumers experience behavioral frictions.
Keywords: pharmaceutical pricing; dynamic oligopoly; state dependence; price cycles
JEL Classification: D43, I11, L13, L40
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