Consumer Search, Market Characteristics, and Price Dispersion: New Evidence from the Retail Markets for Prescription Drugs

Using pharmacy-level price data collected in New Hampshire between 2009 and 2011, this study empirically documents the price distribution in the retail pharmaceutical market, through a dispersion and a price margin analysis. Consistent with previous studies, I find significant negative relationship between price dispersion and search intensity, which is proxied by both direct and indirect measures. In addition, market power and pharmacy type are shown as important factors determining price margins of top-selling prescription drugs. All results are robust to various measures of search intensity and subsamples. Copyright (C) 2014 John Wiley & Sons, Ltd.