Research

Job Market Paper:

Switching Costs, Quality Misconceptions and Behavioral Pricing in the Pharmaceutical Market (Download)
[Unicredit & Universities Best Job Market Paper Award, November 2018]

This article examines the market power of branded prescription drugs faced with generic competition. Using prescription-level and matched socioeconomic panel data of the entire Swedish population between 2010 and 2016, I provide evidence for the key role of switching costs. A discontinuity surrounding patent expirations establishes that the effect is causal. Further, by comparing medical experts to non-experts, I show that non-experts experience considerable quality misconceptions. A unique feature of the Swedish market allows me to rule out patients’ inattention due to information costs as a source of market power. Therefore, switching costs and quality misconceptions are the key determinants of market power. I then estimate a dynamic oligopoly model with forward-looking firms which is used in counterfactual studies of the effect of switching costs and quality misconceptions on prices. First, an increase in the length of procurement mimics a reduction of switching costs. In this scenario prices increase by 6.6%. While the effect of switching costs on prices in theory is ambiguous, moderate switching costs and sufficient competition for new patients increase competitive pressure. Second, if everyone acts as a medical expert and experiences fewer misconceptions, prices would fall by 11.9%.

 

Working Paper:


Price Dynamics of Swedish Pharmaceuticals (Download)
[Rising Star Session, EARIE 2018]

[Best Paper Award, RGS Doctoral Conference in Economics 2018]

 

Work in Progress:

Do District Elected Members of the Parliament favor their District or their Party? A Textual Analysis of Parliamentary Speeches using Machine Learning.
(Together with Andreas Born)

 

Obfuscation and Rational Inattention
(Together with Johannes Kasinger)