Dubois, Pierre and Lasio, Laura (2014) Identifying Industry Margins with Unobserved Price Constraints: Structural Estimation on Pharmaceuticals. TSE Working Paper, n. 14-471, Toulouse

There is a more recent version of this item available.
[thumbnail of wp_tse_471.pdf]
Download (329kB) | Preview


We provide a method allowing identification of margins in an oligopoly price competition game when prices may not be freely chosen in some markets, for example due to regulation. We use our identification strategy to study the effects of regulatory constraints in the pharmaceutical industry. We provide the first structural estimation of price-cost margins on a regulated market with price constraints and show how to identify unknown possibly binding constraints thanks to three different markets (US, Germany and France) with varying regulatory constraints. We use the market for anti-ulcer drugs to identify whether regulation in France truly affects margins and prices and relate regulatory reforms to industry pricing equilibrium. Empirical results show that firms were especially constrained in price setting after the different reforms in 2004. Counterfactual simulations show that total spending significantly increased because of the new price regulation by displacing part of the demand from generics to branded drugs.

Item Type: Monograph (Working Paper)
Language: English
Date: February 2014
Place of Publication: Toulouse
Uncontrolled Keywords: empirical IO, price constraints, Bertrand competition, regulation, pharmaceuticals, antiulcer drugs
JEL Classification: I18 - Government Policy; Regulation; Public Health
L10 - General
Divisions: TSE-R (Toulouse)
Institution: Université Toulouse 1 Capitole
Site: UT1
Date Deposited: 09 Jul 2014 17:42
Last Modified: 15 Feb 2021 14:37
OAI Identifier: oai:tse-fr.eu:27919
URI: https://publications.ut-capitole.fr/id/eprint/15833

Available Versions of this Item

View Item


Downloads per month over past year