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Consumer Search, Market Characteristics, and Price Dispersion: New Evidence from the Retail Markets for Prescription Drugs
Author(s) -
Chen Jihui
Publication year - 2015
Publication title -
managerial and decision economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.288
H-Index - 51
eISSN - 1099-1468
pISSN - 0143-6570
DOI - 10.1002/mde.2694
Subject(s) - price dispersion , margin (machine learning) , market power , dispersion (optics) , medical prescription , economics , pharmacy , mid price , distribution (mathematics) , econometrics , price level , monetary economics , microeconomics , mathematics , medicine , computer science , physics , family medicine , machine learning , optics , pharmacology , monopoly , mathematical analysis
Using pharmacy‐level price data collected in New Hampshire between 2009 and 2011, this study empirically documents the price distribution in the retail pharmaceutical market, through a dispersion and a price margin analysis. Consistent with previous studies, I find significant negative relationship between price dispersion and search intensity, which is proxied by both direct and indirect measures. In addition, market power and pharmacy type are shown as important factors determining price margins of top‐selling prescription drugs. All results are robust to various measures of search intensity and subsamples. Copyright © 2014 John Wiley & Sons, Ltd.