Multimarket Contact in Pharmaceutical Markets

Francisco Javier Coronado, Sergi Jimenez-Martin, Pedro L. Marin
2007 Social Science Research Network  
The purpose of this paper is to analyze the effect of multimarket contact on the behavior of pharmaceutical firms controlling for different levels of regulatory constraints using IMS MIDAS database. Theoretically, firms that meet in several markets are expected to be capable of sustaining implicitly more profitable outcomes, even if perfect monitoring is not possible. Firms may find it profitable to redistribute their market power among markets where they are operating. We present evidence for
more » ... esent evidence for nine OECD countries with different degrees of regulation and show that regulation affects the importance of economic forces on firms' price setting behavior. Furthermore, our results confirms the presence of the predictions of the multimarket theory for more market friendly countries (U.S. and Canada) and less regulated ones (U.K., Germany, Netherlands), in contrast, for highly regulated countries (Japan, France, Italy and Spain) the results are less clear with some countries being consistent with the theory while others contradicting it. JEL Classification: L11, L13, L65, I18
doi:10.2139/ssrn.1003134 fatcat:7fedmnrwtjfejpjlmieuw7srp4