An equilibrium model estimated on pharmaceutical data

The purpose of this paper is to estimate to what extent patients/doctors respond to prices when making a choice between a brand name product and its generics, and also how pharmacies respond to government regulation and to prices set by brand name producers. Data is unique in the sense that we observe prices set by pharmacies as well as by producers. We have estimated the demand side, but also jointly the demand side and the price setting by retailers/wholesalers and producers. Results confirm that estimating only the demand side yields biased estimates. Taking the whole data generating process into account we find much stronger price responses.