Research / BFI Working PaperApr 04, 2022

Does Entry Remedy Collusion? Evidence from the Generic Prescription Drug Cartel

Amanda Starc, Thomas Wollmann

Entry represents a fundamental threat to cartels engaged in price fixing. We study the extent and effect of this behavior in the largest price fixing case in US history, which involves generic drugmakers. To do so, we link information on the cartel’s internal operations to regulatory filings and market data. We find that collusion induces significant entry, which in turn reduces prices. However, regulatory approvals delay most entrants by 2-4 years. We then estimate a structural model to assess counterfactual policies. We find that reducing regulatory delays by just 1-2 years equates to consumer compensating variation of $597 million-$1.52 billion.

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BFI Working Paper Apr 5, 2022

A New Era of Midnight Mergers: Antitrust Risk and Investor Disclosures

John M. Barrios, Thomas Wollmann
Topics:  Financial Markets, Industrial Organization