Research and Market Structure: Evidence from a Pathogenic Outbreak

58 Pages Posted: 24 May 2021 Last revised: 21 Apr 2022

See all articles by Mayank Aggarwal

Mayank Aggarwal

Indian Institute of Management, Ahmedabad

Anindya S. Chakrabati

Indian Institute of Management (IIM), Ahmedabad

Chirantan Chatterjee

SPRU-Sussex, U-Sussex Business School; Hoover Institution, Stanford University; Indian Institute of Management, Ahmedabad

Matthew John Higgins

University of Utah - Department of Entrepreneurship & Strategy; National Bureau of Economic Research (NBER); Max Planck Institute for Innovation and Competition

Multiple version iconThere are 2 versions of this paper

Date Written: May 2021

Abstract

Do upstream research shocks directly and contemporaneously impact related but disconnected downstream product markets? We explore this question using a natural experiment involving the New Delhi Metallo-Beta-Lactamase 1 superbug pathogenic outbreak in India. Using a difference-in-differences strategy, we find that this upstream research shock caused multinational firms selling antibiotics in India to reduce their market exposure. Surprisingly, this void was filled by domestic Indian firms. These results are bolstered by a concurrent decline in multinational prescriptions of focal products by Indian physicians relative to prescriptions for domestic firm products. We present a stylized model building on a Cournot differentiated duopoly model to explain these heterogeneous responses. Results are robust to alternate control groups, including synthetic controls, as well as placebo testing. Implications for health policy and innovation policy are discussed.

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Suggested Citation

Aggarwal, Mayank and Chakrabati, Anindya S. and Chatterjee, Chirantan and Higgins, Matthew John, Research and Market Structure: Evidence from a Pathogenic Outbreak (May 2021). NBER Working Paper No. w28840, Available at SSRN: https://ssrn.com/abstract=3851843

Mayank Aggarwal (Contact Author)

Indian Institute of Management, Ahmedabad ( email )

India

Anindya S. Chakrabati

Indian Institute of Management (IIM), Ahmedabad ( email )

Vastrapur
Ahmedabad, Gujarat 380 015
India

Chirantan Chatterjee

SPRU-Sussex, U-Sussex Business School ( email )

Brighton, BN1 9SL
United Kingdom

HOME PAGE: http://https://profiles.sussex.ac.uk/p535606-chirantan-chatterjee

Hoover Institution, Stanford University ( email )

Stanford, CA 94305
United States

HOME PAGE: http://https://www.hoover.org/profiles/chirantan-chatterjee

Indian Institute of Management, Ahmedabad ( email )

Vastrapur
Ahmedabad, Gujarat 380 015
India

HOME PAGE: http://https://www.iima.ac.in/web/faculty/faculty-profiles/chirantan-chatterjee

Matthew John Higgins

University of Utah - Department of Entrepreneurship & Strategy ( email )

1655 East Campus Center Dr.
Salt Lake City, UT 84112
United States

National Bureau of Economic Research (NBER) ( email )

1050 Massachusetts Avenue
Cambridge, MA 02138
United States

Max Planck Institute for Innovation and Competition ( email )

Marstallplatz 1
Munich, Bayern 80539
Germany

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