Paper #1033

Títol:

Multimarket contact in pharmaceutical markets

Autors:

Javier Coronado, Sergi Jiménez-Martín i Pedro L. Marín

Data:

Abril 2007

Resum:

We analyze the effect of multimarket contact on the pricing behavior of pharmaceutical firms controlling for different levels of regulatory constraints using the IMS MIDAS database for the industry. Theoretically, under product differentiation, firms may find it profitable to allocate their market power among markets where they are operating, specifically from more collusive to more competitive ones. We present evidence for nine OECD countries suggesting the existence of a multimarket effect for more market friendly countries (U.S. and Canada) and less regulated ones (U.K., Germany, Netherlands), while the results are more unstable for highly regulated countries with some countries being consistent with the theory (France) while others contradicting it (Japan, Italy and Spain). A key result indicates that in the latter countries, price constraints are so intense, that there is little room for allocating market power. Thus equilibrium prices are expected in general to be lower in regulated countries.

Paraules clau:

Pharmaceutical prices, Multimarket Contact, Regulation

Codis JEL:

L11, L13, L65, I18

Àrea de Recerca:

Microeconomia / Economia Laboral, Pública, de Desenvolupament i de la Salut / Estadística, Econometria i Mètodes Quantitatius

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