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

Daniel Bennett | Zendy; Wesley Yin | Zendy

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

Author(s) -

Daniel Bennett,

Wesley Yin

Publication year - 2018

Publication title -

the review of economics and statistics

Language(s) - English

Resource type - Journals

SCImago Journal Rank - 8.999

H-Index - 165

eISSN - 1530-9142

pISSN - 0034-6535

DOI - 10.1162/rest_a_00758

Subject(s) - quality (philosophy) , business , exploit , industrial organization , marketing , market share , scale (ratio) , pharmacy , supply chain , distribution (mathematics) , drug prices , emerging markets , commerce , economics , monetary economics , finance , mathematical analysis , philosophy , physics , computer security , mathematics , epistemology , quantum mechanics , computer science , political science , law

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.

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