Our results suggest that facilitating the entrepreneurial activity of BOP (Bottom of Pyramid) firms can curb price dispersion. In contrast, India’s drug-price controls, which are formulated by incorporating prices of branded drugs in markets, may fail to substantially reduce price dispersion but delay the launch of new drugs in India.
Sunday, June 23, 2013
Even Entry at the Bottom Affects Incumbants at the Top
A new paper by Bhaskarabhatla and Chatterjee, "How Do Incumbents Respond to Bottom-of-the-Pyramid Firm Entry?," examines what happened when an unconventional generic pharmaceutical firm entered the Indian market. Mankind Pharma entered by selling very small package sizes to the lowest income segment of the market. Of course, wealthier customers could buy at the reduced prices. The paper documents the reduction in price dispersion and in price levels. Notably, prices fell in anticipation of the entry, when incumbants learned that entry was eminent. From their conclussion: