American Economic Review Vol. 108 No. 12 2018

Identifying Industry Margins with Price Constraints: Structural Estimation on Pharmaceuticals

Pierre Dubois¹; Laura Lasio²

¹ Toulouse School of Economics, University of Toulouse, 1 Capitole, Toulouse, 21 allée de Brienne 31000 Toulouse, France (email: ) · ² McGill University, 855 Sherbrooke Street W, Montreal, Quebec, H3A 2T7 Canada, CIREQ, and CIRANO (email: )

Abstract

We develop a structural model to investigate the effects of pharmaceutical price regulation on demand and on manufacturers’ price-setting behavior in France. We estimate price-cost margins in a regulated market with price constraints and infer whether these constraints are binding, exploiting cost restrictions across drugs, which come from observing the same drugs in potentially price-constrained markets (France) and in markets where prices are unregulated (United States and Germany). Our counterfactual simulations suggest that price constraints generated modest savings for anti-ulcer drugs in 2003–2013 (2 percent of total expenses), relative to a free pricing scenario, and shifted consumption from generic to branded drugs.

DOI

10.1257/aer.20140202

Volume

108

Issue

12

Pages

3685-3724

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

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