The Relative Importance of Actual and Potential Competition: Empirical Evidence From the Pharmaceuticals Market |
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| Authors: | Mats A. Bergman Niklas Rudholm |
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| Affiliation: | Department of Economics, Uppsala University, Sweden and Department of Economics, Göteborg University, Göteborg, Sweden.; Department of Economics, UmeåUniversity, Sweden.; |
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| Abstract: | We study actual and potential competition and other factors that determine price paths of brand-name drugs in the Swedish pharmaceuticals market. The results indicate that the price of the incumbent product is lowered by potential competition, entry of (additional) generics, and the introduction of a so-called reference-price system. We also identify a 'ratchet' effect, through which price regulation makes entry-deterring limit-pricing credible. |
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