Tuesday, June 21, 2011

Applications Want to be Free: Privacy Against Information

Posted by D. Daniel Sokol

Michael Hammock (Middle Tenn. State Univ.) & Paul Rubin (Emory) address Applications Want to be Free: Privacy Against Information.

ABSTRACT: The debate over online privacy pays too little attention to the costs and benefits of the current systems of privacy protection and advertising-supported online applications. The costs of online privacy-related harm (such as identity theft) and of protective activities are small relative to the benefits from applications that are supported by online advertising, which depends on the collection of personal information. Advocates of increased privacy focus too much on increased privacy as a solution, and not enough on alternative forms of information security. Surveys show that consumers do not like targeted advertising, or the information collection that allows it, but this may be a form of rational irrationality.That is, it may not pay for consumers to understand the costs and benefits of reduced information use.

June 21, 2011 | Permalink | Comments (0) | TrackBack (0)

Monday, June 20, 2011

Home of FTC Chairman Jon Leibowitz Toilet Papered

Posted by D. Daniel Sokol

Ruth Marcus (wife of FTC Chairman Jon Leibowitz) ran a column on Friday in the Washington Post about how their house was toilet papered. She thinks it was teeangers. We cannot rule out that it was not a company under investigation or found to be in violation of the antitrust laws or even, dare I suggest it, an inside job at the FTC (some Bureau of Competition lawyers blame the economists at the Bureau of Economics and vice versa). Given inter-agency squabbling in recent months, maybe it was someone at DOJ Antitrust. As Marcus writes:

It really was an impressive job. This was not a half-baked effort, a few rolls casually tossed here and there. It was a three-tree, double-ply extravaganza. The diligence of our attackers will stand them in good stead later in life.

At least one of the perpetrators had a pretty good arm. One of the rolls landed by the bedroom window, raising the question of how the dog managed to snore through the entire event. There was a shaving cream component and, my favorite touch, a Dada-esque field of plastic forks stuck in the lawn.

Update - June 21: A European asked me what is it to toilet paper a house.  Apparently this is not done in Europe.  I found a clip on youtube that speaks for itself.

 

June 20, 2011 | Permalink | Comments (1) | TrackBack (0)

Payment Card Regulation and the Use of Economic Analysis in Antitrust

Posted by D. Daniel Sokol

Jean Tirole (Univ. of Toulouse) explains Payment Card Regulation and the Use of Economic Analysis in Antitrust.

ABSTRACT: A key input of our modern economies, payment cards are ubiquitous; debit and credit cards offer a wide range of alternatives to cash and checks to operate brick and mortar, e- and mobile phone, and P2P payments. The contours of the industry are rapidly changing. The payment card industry is also becoming one of the most heavily regulated industries in some parts of the world. The United States and Europe, as well as a number of other jurisdictions across the world, have been or are in the process of regulating inter alia, the network-determined payment made by the merchant's bank (called the acquirer) to the cardholder's bank (the issuer). This "Interchange Fee" has been the object of much controversy and the theoretical underpinnings of its regulation are still debated. The primary object of this note is to clarify the considerations that should be brought to bear on the determination of regulated fees. It argues that some broadly contemplated regulatory methodologies bear only limited resemblance with economically sound precepts. Finally, it derives some implications of these regulations for the likely evolution of the payment card industry.

June 20, 2011 | Permalink | Comments (0) | TrackBack (0)

Emergence of Global Search Engines: Trends in History and Competition

Posted by D. Daniel Sokol

Manish Agarwal & David Round (Univ. of South Australia) present Emergence of Global Search Engines: Trends in History and Competition.

ABSTRACT: The web search market is an example of a two-sided market where internet users account for one side and the advertisers for the other. Given the increased regulatory scrutiny faced by the web search market, this paper uses the two-sided market framework to analyze the market structure and the behavioral trends on both sides of the market in order to assess the state of competition in this market. Section 2 traces the evolution of the web search engines. Section 3 presents the two-sided market framework and examines trends on both sides of the web search market. Section 4 concludes.

June 20, 2011 | Permalink | Comments (0) | TrackBack (0)

European Commission consults on quantifying harm in EU antitrust actions - deadline: September 30, 2011

Posted by D. Daniel Sokol

According to an email i just received from Connor Maguire:

On Friday June 17, the European Commission launched a public consultation on a draft Guidance paper on quantifying harm in actions for damages for breaches of the EU antitrust rules.

Among others, the non-binding Guidance aims to:

  • Provide European national courts and opposing parties with economic and practical insights into the methods and techniques that can be used to quantify damages.
  • Present the main methods and techniques currently available to quantify harm stemming from violation of the EU antitrust rules.
  • Alleviate one of the current obstacles to a more effective system of civil compensation for victims of EU antitrust infringements.

Following the European Court of Justice’s judgment in Case C-360/09 Pfleiderer AG v Bundeskartellamt delivered on June 14, practitioners’ on both sides of the Atlantic should be interested in understanding how the Guidance, while independent of any future EU legislation on collective redress, will help achieve the common goal of maximising the effectiveness of the basic EU law right to compensation for infringements of the EU antitrust rules.    

The public consultation website can be found at http://ec.europa.eu/competition/consultations/2011_actions_damages/index_en.html

 Deadline for comments: Friday, September 30, 2011.

June 20, 2011 | Permalink | Comments (0) | TrackBack (0)

Ofcom's Approach and Priorities for Consumer Protection and Empowerment

Posted by D. Daniel Sokol

Andrea Coscelli & Claudio Pollack (Ofcom) describe Ofcom's Approach and Priorities for Consumer Protection and Empowerment.

ABSTRACT: This paper discusses Ofcom's current activities related to consumer protection and empowerment. It describes our approach and framework for analysis, and goes on to examine those areas we currently treat as our top priorities. We do so by exploring the following questions:

What is the role of consumer policy? What do we mean by consumer protection and empowerment? What issues have given rise to concerns in our recent experience? What tools do we have to improve consumer outcomes, taking account of the impact of market mechanisms and the role of incentives? What is the evidence of the effectiveness of our approach to date?

We also briefly discuss our proposed intervention against the sale of automatically renewable contracts to purchasers of fixed voice and fixed broadband services. Our protection and empowerment work complements our competition work as it addresses areas where markets without dominant providers are not functioning perfectly for consumers in terms of their ability to compare and switch providerseasily as well as to negotiate, understand, and enforce contracts. As the OFT states "markets work well when there are efficient interactions on both the demand (consumer) and supply (firm) side. On the demand side, confident consumers activate competition by making well-informed and well-reasoned decisions which reward those firms which best satisfy their needs." In addition to our powers using regulations and our work with industry, we also discuss the scope for incorporating greater use of comparative information and behavioral economics to improve market outcomes and reduce consumer harm.

June 20, 2011 | Permalink | Comments (0) | TrackBack (0)

What Antitrust Law Can (and Cannot) Teach About the First Sale Doctrine

Posted by D. Daniel Sokol

Ariel Katz, University of Toronto - Faculty of Law suggests What Antitrust Law Can (and Cannot) Teach About the First Sale Doctrine.

ABSTRACT:The first sale doctrine (or exhaustion) limits the exclusive rights that survive the initial authorized sale of an item protected by such rights. The first sale doctrine has always been under pressure by owners of intellectual property rights, and courts have never been able to precisely outline its contours, or fully articulate its rationale. Recently, and somewhat counter-intuitively, insights borrowed from modern antitrust law and economics are invoked to provide a seemingly robust theoretical foundation for undermining exhaustion rules or narrowing their scope, and thereby strengthen IP owners’ control over downstream distribution and use of the goods they produce.

This article shows why this trend is misguided and agues that it should be resisted, not because the insights from modern antitrust are irrelevant, quite the contrary. Indeed, the insights from modern antitrust law and economics can help underpin some of the first sale doctrine’s missing theoretical foundations and help drawing its proper contours. However, as this article demonstrates, the insights from modern antitrust do not support the case against the first sale doctrine. When taken seriously, these insights ultimately support its continued vitality.

June 20, 2011 | Permalink | Comments (0) | TrackBack (0)

Sunday, June 19, 2011

CALL FOR PAPERS: Current Research in Competition Law XVIIIth Competition Law Scholars Forum (CLaSF) Workshop - Thursday September 22nd 2011

Posted by D. Daniel Sokol

CALL FOR PAPERS
Current Research in Competition Law
XVIIIth Competition Law Scholars Forum (CLaSF) Workshop
www.clasf.org
Thursday September 22nd 2011 City Law School, City University, Grays Inn, London

The Competition Law Scholars Forum (CLaSF) will be running a workshop on 22nd September 2011. The subject of the workshop will be the broad theme of Current Research in Competition Law. We invite applications from researchers in competition law covering the whole field but focussing on recent research projects they have been involved with over the last couple of years; projects with regulatory agencies; projects with think tanks or law & economics projects. We would be particularly interested in research aspects of competition law where there is a comparative aspect or based on the interplay between law and politics, and the workshop would hope to discuss a broad range of research issues, whether empirical or otherwise, such as merger remedies, cartel procedures, the role of behavioural economics in competition law etc. We also welcome applications by law firms or regulatory agencies where research has been undertaken in a competition law field. Papers are invited from scholars, regulators and practitioners on any of these issues or other topics which fall generally within the broad theme of Current Research in Competition Law. Any person interested in presenting a paper at the workshop is asked to contact the Chair of CLaSF, Professor Alan Riley at alan.riley.1@city.ac.uk.

In the first instance an abstract is required of approximately 500-1000 words, a draft paper is also required a week prior to the workshop. Please submit your abstract by Friday 15th July. Papers presented at the workshop can be submitted to the Competition Law Review editorial board with a view to being published in the Review. Note that the Review is a fully refereed scholarly law journal: Submission does not guarantee publication.

June 19, 2011 | Permalink | Comments (0) | TrackBack (0)

Saturday, June 18, 2011

Fordham 38th Annual Conference on International Antitrust Law and Policy: Wednesday, September 7 & Thursday, September 8, 2011

Posted by D. Daniel Sokol

Barry Hawk's annual Fordham antitrust conference looks like a big winner this year in terms of topics and speakers, and not merely because my newest colleague Wentong Zheng will participate in a session on China's AML.

Dates for the 38th Annual Conference on International Antitrust Law and Policy:
Wednesday, September 7 & Thursday, September 8, 2011.

The conference will be held at McNally Amphitheater, Fordham Law School, located at 140 West 62nd Street, New York, NY.

Each year, a full two-day program focuses on a wide range of issues related to antitrust policy and enforcement. Leaders in the field, representing competition authorities, the judiciary, private practice and the academia, regularly contribute to the success of the conference as speakers and discussants.

The conference attracts close to 400 participants, including competition authorities from Africa, Asia, Europe, Latin/South America and North America, as well as practitioners and academics.

- - - - - - - -

For PROGRAM details, click here.

For CLE details, click here.

 

June 18, 2011 | Permalink | Comments (0) | TrackBack (0)

Friday, June 17, 2011

Antitrust Division Issues Updated Merger Remedies Guide

Posted by D. Daniel Sokol

According to a press release:

The Department of Justice today released an updated version of the Antitrust Division’s Policy Guide to Merger Remedies. The policy guide is a tool for Antitrust Division staff to use in analyzing proposed remedies in its merger matters. It also provides transparency into the division’s approach to merger remedies for the business community, the antitrust bar and the broader public.

You can get a copy of the Merger Remedies Guide here.

June 17, 2011 | Permalink | Comments (0) | TrackBack (0)

International Competition Enforcement Law between Cooperation and Convergence

Posted by D. Daniel Sokol

Jorg Philipp Terhechte, University of Hamburg discusses International Competition Enforcement Law between Cooperation and Convergence.

ABSTRACT: International Competition Enforcement Law is a new field of research in jurisprudence which, until now, has attracted little attention. Academic debate has, in recent years, concentrated almost entirely on substantive law. Such an imbalanced focus, however, risks losing sight of the fact that the differing procedures, complex networks of cooperation between authorities and courts, and also the diverse organizational structures of the authorities all have an influence on the decision-making process in a manner which ought not to be underestimated. Whereas an increasing convergence of national, international and supranational law may be observed in the field of substantive law, enforcement law is character-ized by a wide range of different approaches, as well as the complexity which necessarily accompanies such diversity in approach. A closer look at International Competition Enforcement Law quickly reveals a multitude of national cartel and competition laws (approximately 100 at the moment), all of which feature different procedural quirks. Furthermore, there is supranational law and, in particular, with respect to procedure, complicated EU law, as well as variety of regional regimes (for example, MERCOSUR or NAFTA), all of which are based on completely different procedural traditions. Lastly, there are several international bodies (for example, the WTO or OECD) which aim at harmonizing and/or shaping procedural rules. These differences in regulation pose the question whether it is indeed possible to create a set of common principles for competition and merger control law. This is the premise of this book, which discusses the most important national procedural rules, while also exploring links to supranational and international law and analyzing the comprehensive cooperative networks. With this approach, it is possible to delineate the general structures and basic principles of International Competition Enforcement Law and piece them together.

June 17, 2011 | Permalink | Comments (0) | TrackBack (0)

Article 82, Sector-Specific Regulation, Microsoft and Telefonica: Really a New Economic Understanding of Abusive Practices Under EC Law?

Posted by D. Daniel Sokol

Fernando Diez, University of Antonio de Nebrija asks Article 82, Sector-Specific Regulation, Microsoft and Telefonica: Really a New Economic Understanding of Abusive Practices Under EC Law?

ABSTRACT: Article 82 of EC Treaty prohibits any abuse by one or more undertakings of a dominant position; the examples contained of “abuse” reflect a variety of public policies that have led European antitrust authorities in several directions simultaneously, indicating also a highly regulatory policy of control of the adverse effects of market power in the EU. The lack of guidance in this field both for undertakings and enforcers led the European Commission to issue in 2005 the well known Discussion Paper on exclusionary abuses; although also announced, a further notice on the so-called exploitative abuses is still waited. Besides, a more economic approach to abusive practices is preached from virtually all the communitarian instances. However, two recent decisions – the fine imposed in July 2007 to Telefonica for practicing excessive prices in the form of margin squeeze in the broad band market in Spain, and the confirmation in September 2007 by the Court of First Instance of the fine imposed to Microsoft in 2004 for two allegedly anticompetitive practices (tying and refusal to supply) - suggest that this new economic understanding is either still forthcoming or not yet understood as such by everybody. In this paper we take all this considerations into account when analyzing two features of the current understanding of abusive practices under EC law. First, the evolution from early decisions finding excessive prices and refusals to deal – which were mostly vertical in nature- to the latest pronouncements show a shift to horizontal effects. In addition to it, the ex ante regulation of certain industries – e.g. telecommunications - has certainly altered the way in which antitrust ex post intervention is conducted. Both phenomena are illustrated respectively by the Telefonica and Microsoft cases, and need to be assessed under the new economic approach to Article 82 practices.

June 17, 2011 | Permalink | Comments (0) | TrackBack (0)

Quality Upgrading of Italian Manufactures: Evidence from Firms’ Prices and Strategies

Posted by D. Daniel Sokol

Valter Di Giacinto, Bank of Italy and Giacinto Micucci, Bank of Italy explain Quality Upgrading of Italian Manufactures: Evidence from Firms’ Prices and Strategies.

ABSTRACT: Even before the global crisis, the Italian economy was in difficulties internationally, but slow growth and a declining share of world trade were accompanied by a perceptible process of manufacturing transformation. This paper, using data from the Bank of Italy’s survey of manufacturers, measures a crucial aspect of the transformation, namely quality upgrading, from 2000 to 2006. The gauge of upgrading, not used in earlier literature, is the portion of price changes representing the return to value creation, both tangible (new products and improvement of existing ones) and intangible (branding policies). We find evidence of upgrading capable of explaining a quarter of the firms’ average annual price increases (about 0.5 out of 2 percentage points), with roughly equal effects from the tangible and the intangible components. The analysis also shows that strategies of product upgrading helped foster job creation and sales growth.

June 17, 2011 | Permalink | Comments (0) | TrackBack (0)

Thursday, June 16, 2011

Ensuring Competition in the Clouds: The Role of Competition Law?

Posted by D. Daniel Sokol

Ian Walden, Queen Mary University of London, School of Law and Laise Da Correggio Luciano ask Ensuring Competition in the Clouds: The Role of Competition Law?

ABSTRACT: This article examines the potential applicability of competition law to the cloud computing sector, as well as assessing its suitability as a regulatory regime. It then considers alternative legal mechanisms, specifically measures to promote open standards and interoperability in the context of public procurement, as well as a data portability right as a demand-side measure. Despite being early days, the article argues that these latter mechanisms are likely to have a more significant impact on competition in the cloud computing sector than intervention using traditional competition measures.

June 16, 2011 | Permalink | Comments (0) | TrackBack (0)

The Intersection of Consumer Protection and Competition in the New World of Privacy

Posted by D. Daniel Sokol

Julie Brill (FTC) describes The Intersection of Consumer Protection and Competition in the New World of Privacy.

ABSTRACT: Privacy issues are becoming increasingly important during this time of rapid technological advance. This article addresses the important question of how the FTC might balance the consumer protection concerns arising in the context of privacy with competition issues. It will first examine the basic principles of consumer protection and competition law, the two core missions of the FTC, and then take a look at some cases and other actions by the FTC outside the privacy realm that illustrate the different modes of interaction between the two areas of law. The agency's careful balance of its two core missions becomes clear through this exercise. Next, the article will describe the most recent evolution of privacy law at the agency, and the FTC's preliminary staff report on privacy. Included in the discussion will be a review of some of the latest privacy protection proposals from industry members. Finally, the article will discuss the interplay of some core consumer protection and competition principles in analyzing the privacy protection proposals.

June 16, 2011 | Permalink | Comments (0) | TrackBack (0)

THE ECONOMIC ANALYSIS OF ENERGY MERGERS IN EUROPE AND IN SPAIN

Posted by D. Daniel Sokol

Giulio Federico (IESE Business School) has written on THE ECONOMIC ANALYSIS OF ENERGY MERGERS IN EUROPE AND IN SPAIN.

ABSTRACT: This article surveys, from an economic perspective, the recent application of merger control in the European energy sector. It considers ten significant transactions in the energy sector: the eight largest energy transactions assessed by the European Commission since 2004, as well as two major gas-electricity mergers in Spain over roughly the same period. Merger decisions in the energy sector have been characterized by a significant concern for potential horizontal unilateral effects, even in situations where the merging parties accounted for a limited combined share of the market, or where one of the parties was only a small competitor. A variety of non-horizontal concerns have also been considered by the competition authorities, including effects flowing from the increasing use of gas for electricity generation or from limited ownership unbundling of network assets. Remedy packages have typically included extensive structural divestments to remove competition concerns. Given the nature of competition in energy markets, particularly effective remedies are those that involve the sale of price-setting generation plants, network assets, and controlling stakes in merging parties' competitors.

June 16, 2011 | Permalink | Comments (0) | TrackBack (0)

Job Posting at the OECD: VACANCY IN THE COMPETITION DIVISION: SENIOR COMPETITION EXPERT (Seoul Regional Centre)

Posted by D. Daniel Sokol

VACANCY IN THE COMPETITION DIVISION: SENIOR COMPETITION EXPERT (Seoul Regional Centre)

This job is based in Paris.

We are looking for a senior expert with substantial experience in competition policy analysis and the application of competition laws. S/he will be responsible for providing competition capacity building in the Asian region through the OECD-Korea Policy Centre, Competition Programme (RCC) in Seoul.

The Centre’s activities focus upon helping to build capacity to support effective, efficient competition law enforcement and pro-competitive reform in non-member economies in Asia, to enhance economic performance, growth, employment and living standards in the region.

The activities are part of a broader work programme of co-operation with non OECD member economies in the Competition Division (http://www.oecd.org/competition) of the Directorate for Financial and Enterprise Affairs (DAF).

For further information, please consult our careers website (Ref. 07736) - https://oecd.taleo.net/careersection/ext/joblist.ftl

 

June 16, 2011 | Permalink | Comments (0) | TrackBack (0)

Battles Among Licensed Occupations: Analyzing Government Regulations on Labor Market Outcomes for Dentists and Hygienists

Posted by D. Daniel Sokol

Morris M. Kleiner, University of Minnesota and Kyoung Won Park, University of Minnesota have an interesting paper on Battles Among Licensed Occupations: Analyzing Government Regulations on Labor Market Outcomes for Dentists and Hygienists.

ABSTRACT: Occupational licensing is among the fastest-growing labor market institutions in the U.S. economy. One of the key features of occupational licensing is that the law determines who gets to do the work. In those cases where universally licensed occupations are both complements to and substitutes for one another in providing a service, the government determines who can do the tasks that are required for the consumer. In this study, we examine dentists and dental hygienists, who are both universally licensed and provide complementary services to patients, but may also be substitutes as service providers. We focus on the labor market implications of governmental requirements on permissible tasks and the supervision of hygienists’ activities by dentists. Since there are elements of monopsony in the market we examine, we use the model as a guide for our analysis. We find that states that allow hygienists to be self-employed have about 10 percent higher earnings, and that dentists in those states have lower earnings and slower employment growth. Several sensitivity and falsification tests using other regulated and partially regulated occupations show that our licensing measures are generally robust to alternative specifications. Our estimates are consistent with the view that winning the policy and legal battle in the legislature and courts on the independence of work rules matters in the labor market for these occupations.

June 16, 2011 | Permalink | Comments (0) | TrackBack (0)

Wednesday, June 15, 2011

Competition Law and Distributive Justice: A Critical State of Play

Posted by D. Daniel Sokol

UCL's Centre for Law, Economics and Society at the UCL Faculty of Laws presents


Competition Law and Distributive Justice: 
A Critical State of Play 


on Wednesday 13 July 2011, from 4-7pm


Speaker: 

  • Professor Herbert Hovenkamp
    Ben and Dorothy Willie Chair, College of Law, University of Iowa


Commentators:

  • Professor Kai-Uwe Kühn
    Chief economist, DG Competition, European Commission
  • Dr. Jorge Padilla
    Senior Managing Director and Head of Compass Lexecon Europe
  • Dr. Ioannis Lianos
    City Solicitors' Educational Trust Reader in European and Competition Law; Director, Centre for Law, Economics and Society, Faculty of Laws, UCL

 

About this talk: 
The debate over the objectives of competition law statutes has recently intensified. There are many reasons for this:

First, competition law has expanded globally to different forms of economies and societal bases, thus leading to different conceptions over its scope and aims.

Second, the expansion of competition law has led to tensions between different legal regimes regulating the conduct of corporations in global markets.

Thirdly, more and more State activities are now infused with a form of competition culture: competition law is applied to previously exempted economic activities and even to some State activities, competition advocacy has also developed. Equity considerations are explicitly integrated as objectives of several competition legislations around the world, and more specifically EU competition law in the area of state aids control, alongside efficiency (total welfare). Some could also envision the standard of consumer welfare as a distributive justice standard, in the sense that it focuses on wealth transfers from consumers to antitrust law infringers. This raises questions over the deep meaning of competition law and its interaction with other public policies, including policies aiming at wealth redistribution.

Fourthly, economic analysis and evidence has become an essential ingredient of competition law discourse. Economic rhetoric emphasises efficiency considerations, but does not suppress the need for distributive choices. The recent work of the Stiglitz, Sen and Fitoussi Commission on the measurement of economic performance and social progress and the OECD happiness index illustrate this trend. Recent work has also highlighted the importance of equality concerns and distributive justice in public policy more generally (e.g. "The Spirit level"). More generally, there are fundamental questions raised by the application within the legal system of the principles of welfare economics, in view of the Stiglitz-Atkinson theorem and more generally the consideration of distributive justice by welfare economics.

The concept of distributive justice also has considerably evolved over time. To be sure, its content is not the same as in the 1930s'. Finally, the recent emphasis of competition law worldwide on fostering consumer interest requires difficult choices from policy makers, competition authorities and the courts. They must set priorities over the long v. short term consumer interest (thus including intertemporal trade offs), trade off the interest of some classes of consumers versus others, adopt - explicitly or implicitly - a specific conception of the consumer (marginal versus infra-marginal, neoclassical versus behavioural...).

The objective of this workshop will be to reflect on these fundamental issues in competition law and policy by inviting contributions from competition lawyers, economists, historians of economic thought, philosophers and sociologists.

 

Accredited with 3 CPD hour by the Solicitors Regulation Authority and the Bar Standards Board (applied for)

June 15, 2011 | Permalink | Comments (0) | TrackBack (0)

Margins and Market Shares: Pharmacy Incentives for Generic Substitution

Posted by D. Daniel Sokol

Kurt Richard Brekke (Dept. of Economics, Norwegian School of Economics and Business Administration), Tor Helge Holmas (Stein Rokkan Centre for Social Studies) and Odd Rune Straume(University of Minho) address Margins and Market Shares: Pharmacy Incentives for Generic Substitution.

ABSTRACT: We study the impact of product margins on pharmacies’ incentive to promote generics instead of brand-names. First, we construct a theoretical model where pharmacies can persuade patients with a brand-name prescription to purchase a generic version instead. We show that pharmacies’substitution incentives are determined by relative margins and relative patient copayments. Second, we exploit a unique product level panel data set, which contains information on sales and prices at both producer and retail level. In the empirical analysis, we find a strong relationship between the margins of brand-names and generics and their market shares. In terms of policy implications, our results suggest that pharmacy incentives are crucial for promoting generic sales.

June 15, 2011 | Permalink | Comments (0) | TrackBack (0)