òòò½Íø Review
ISSN 0002-8282 (Print) | ISSN 1944-7981 (Online)
Does Entry Remedy Collusion? Evidence from the Generic Prescription Drug Cartel
òòò½Íø Review
vol. 115,
no. 5, May 2025
(pp. 1400–1438)
Abstract
Entry represents a fundamental threat to cartels. We study the extent and effect of this behavior in the largest price-fixing case in US history, which involves generic drug manufacturing. We link information on the cartel's internal operations to regulatory filings and market data. There is a substantial increase in entry after cartel formation, but regulatory approvals delay most entrants by two to four years. We estimate a structural model and simulate counterfactual equilibria. Absent entry, cartel profits would be dramatically higher. Correspondingly, reducing regulatory delays by just 1–2 years equates to consumer compensating variation of $612 million–$1.5 billion.Citation
Starc, Amanda, and Thomas G. Wollmann. 2025. "Does Entry Remedy Collusion? Evidence from the Generic Prescription Drug Cartel." òòò½Íø Review 115 (5): 1400–1438. DOI: 10.1257/aer.20220276Additional Materials
JEL Classification
- L12 Monopoly; Monopolization Strategies
- L13 Oligopoly and Other Imperfect Markets
- L25 Firm Performance: Size, Diversification, and Scope
- L51 Economics of Regulation
- L65 Chemicals; Plastics; Rubber; Drugs; Biotechnology
- M31 Marketing
- O34 Intellectual Property and Intellectual Capital