Abstract
AbstractThis paper studies responses to competition with the use of dynamic models that distinguish between short- and long-term price effects. The dynamic models also allow lagged numbers of competitors to become valid and strong instruments for the current numbers, which enables studying the causal effects using flexible specifications. A first parallel trader is found to decrease prices of exchangeable products by 7% in the long term. On the other hand, prices do not respond to the first competitor that sells therapeutic alternatives; but competition from four or more competitors that sell on-patent therapeutic alternatives decreases prices by about 10% in the long term.
Funder
swedish competition authority
Umea University
Publisher
Springer Science and Business Media LLC
Subject
Management of Technology and Innovation,Organizational Behavior and Human Resource Management,Strategy and Management,Economics and Econometrics
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