Does Entry Remedy Collusion? Evidence from the Generic Prescription Drug Cartel / Amanda Starc, Thomas G. Wollmann.

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Starc, Amanda

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w29886.Publication details: Cambridge, Mass. National Bureau of Economic Research 2022.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: Entry represents a fundamental threat to cartels engaged in price fixing. We study the extent and effect of this behavior in the largest price fixing case in US history, which involves generic drugmakers. To do so, we link information on the cartel's internal operations to regulatory filings and market data. We find that collusion induces significant entry, which in turn reduces prices. However, regulatory approvals delay most entrants by 2-4 years. We then estimate a structural model to assess counterfactual policies. We find that reducing regulatory delays by just 1-2 years equates to consumer compensating variation of $597 million-$1.52 billion.

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Item type	Home library	Collection	Call number	Status	Date due	Barcode	Item holds
Working Paper	Biblioteca Digital	Colección NBER	nber w29886 (Browse shelf(Opens below))	Not For Loan

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March 2022.

Entry represents a fundamental threat to cartels engaged in price fixing. We study the extent and effect of this behavior in the largest price fixing case in US history, which involves generic drugmakers. To do so, we link information on the cartel's internal operations to regulatory filings and market data. We find that collusion induces significant entry, which in turn reduces prices. However, regulatory approvals delay most entrants by 2-4 years. We then estimate a structural model to assess counterfactual policies. We find that reducing regulatory delays by just 1-2 years equates to consumer compensating variation of $597 million-$1.52 billion.