The Market for High-Quality Medicine / Daniel Bennett, Wesley Yin.

Format:

Book

Author/Creator:

Bennett, Daniel.

Contributor:

National Bureau of Economic Research.

Yin, Wesley.

Series:

Working Paper Series (National Bureau of Economic Research) no. w20091.

NBER working paper series no. w20091

Language:

English

Physical Description:

1 online resource: illustrations (black and white);

Place of Publication:

Cambridge, Mass. National Bureau of Economic Research 2014.

Summary:

This study examines the effect of chain store entry on drug quality and prices in the retail pharmacy market in Hyderabad, India. In contrast to prevailing mom-and-pop pharmacies, chains exploit scale economies to offer high-quality drugs at lower cost. With a unique data set and a natural experiment methodology, we show that chain entry leads to a relative 5 percent improvement in drug quality and a 2 percent decrease in prices at incumbent retailers. These changes do not depend on the socioeconomic status of consumers, suggesting that chain entry improves consumer welfare throughout the market. Despite the likely role of asymmetric information in this market, we show that consumers partially infer these quality improvements. Our findings suggest that in markets with asymmetric information, organizational technologies such as chains may play an important role translating greater demand into higher quality.

Notes:

Print version record

May 2014.