Parallellhandel och hur den påverkar läkemedelspriser - Marknadsdynamiken mellan parallellimportör och originalfabrikant
(2014) NEKH01 20132Department of Economics
- Abstract
- In a market with homogeneous products and no barriers to trade, arbitrage, in the form of parallel imports of pharmaceuticals, is expected to lead to a price convergence in the market as a whole, preferably downwards, as an effect of competitive behavior between the parallel trader and the pharmaceutical producer. Such an effect on prices have however only sparsely been shown in previous research, and evidence of the absence of such an effect is a more common finding.
Due to a number of characteristics of the pharmaceutical market, such as heavy state regulation, resulting in a rigidity in prices as well as external reference prices, combined with parallel importers facing a limited supply – the pharmaceutical industry has no or little... (More) - In a market with homogeneous products and no barriers to trade, arbitrage, in the form of parallel imports of pharmaceuticals, is expected to lead to a price convergence in the market as a whole, preferably downwards, as an effect of competitive behavior between the parallel trader and the pharmaceutical producer. Such an effect on prices have however only sparsely been shown in previous research, and evidence of the absence of such an effect is a more common finding.
Due to a number of characteristics of the pharmaceutical market, such as heavy state regulation, resulting in a rigidity in prices as well as external reference prices, combined with parallel importers facing a limited supply – the pharmaceutical industry has no or little reason to deter such parallel trade activity by cutting prices, but rely instead on limiting the market share of parallel traders by hindering available supply for parallel trade and by various means increase their trading costs. An accommodation strategy proves to be more profitable for the global pharmaceutical company as a whole, also to avoid spill over effects of cutting prices in one market.
Using an empirically based model to simulate the profit and loss occurring from parallel trade, we support the theoretical finding of a Nash equilibrium by doing nothing. (Less)
Please use this url to cite or link to this publication:
http://lup.lub.lu.se/student-papers/record/4312428
- author
- Rolander, Cecilia LU
- supervisor
- organization
- alternative title
- Parallel Trade and its Effect on Pharmaceutical Prices - The Market Dynamics Between the Pharmaceutical Producer and the Parallel Importer
- course
- NEKH01 20132
- year
- 2014
- type
- M2 - Bachelor Degree
- subject
- keywords
- Parallellimport, arbitrage, läkemedelsprissättning, priskonkurrens
- language
- Swedish
- id
- 4312428
- date added to LUP
- 2014-02-14 11:08:06
- date last changed
- 2014-02-14 11:08:06
@misc{4312428,
abstract = {{In a market with homogeneous products and no barriers to trade, arbitrage, in the form of parallel imports of pharmaceuticals, is expected to lead to a price convergence in the market as a whole, preferably downwards, as an effect of competitive behavior between the parallel trader and the pharmaceutical producer. Such an effect on prices have however only sparsely been shown in previous research, and evidence of the absence of such an effect is a more common finding.
Due to a number of characteristics of the pharmaceutical market, such as heavy state regulation, resulting in a rigidity in prices as well as external reference prices, combined with parallel importers facing a limited supply – the pharmaceutical industry has no or little reason to deter such parallel trade activity by cutting prices, but rely instead on limiting the market share of parallel traders by hindering available supply for parallel trade and by various means increase their trading costs. An accommodation strategy proves to be more profitable for the global pharmaceutical company as a whole, also to avoid spill over effects of cutting prices in one market.
Using an empirically based model to simulate the profit and loss occurring from parallel trade, we support the theoretical finding of a Nash equilibrium by doing nothing.}},
author = {{Rolander, Cecilia}},
language = {{swe}},
note = {{Student Paper}},
title = {{Parallellhandel och hur den påverkar läkemedelspriser - Marknadsdynamiken mellan parallellimportör och originalfabrikant}},
year = {{2014}},
}