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The Market for High-Quality Medicine: Retail Chain Entry and Drug Quality in India

Daniel Bennett¹; Wesley Yin²

¹ University of Southern California · ² University of California, Los Angeles

This study examines the effect of chain store entry on drug quality and prices in India. In contrast to prevailing mom-and-pop pharmacies, chains exploit scale economies in distribution and signaling to offer high-quality drugs at lower cost. We show that chain entry leads to a 5% improvement in drug quality and a 2% decrease in prices at incumbent retailers. Effects are larger for locally distributed drug brands but do not depend on consumer SES. Our findings suggest that in markets with asymmetric information, organizational technologies such as chains can play an important role translating market expansion into higher quality.

DOI

10.1162/rest_a_00758

Volume

101 (1)

Pages

76-90

Language

en

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