Scandinavian Working Papers in Economics

Working Paper Series,
Research Institute of Industrial Economics

No 1325: Price Dynamics of Swedish Pharmaceuticals

Aljoscha Janssen ()
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Aljoscha Janssen: Singapore Management University, Postal: and Research Institute of Industrial Economics, Stockholm, Sweden

Abstract: 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 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-codes: D43; I11; L13; L40

42 pages, March 18, 2020

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