Can Good Products Drive Out Bad? Evidence from Local Markets for (Fake?) Antimalarial Medicine in Uganda

50 Pages Posted: 28 Sep 2012

See all articles by Martina Bjorkman Nyqvist

Martina Bjorkman Nyqvist

Stockholm School of Economics

Jakob Svensson

Stockholm University - Institute for International Economic Studies (IIES); Centre for Economic Policy Research (CEPR)

David Yanagizawa-Drott

University of Zurich

Date Written: September 2012

Abstract

Counterfeit and sub-standard antimalarial drugs present a growing threat to public health. This paper investigates the mechanisms that determine the prevalence of fake antimalarial drugs in local markets, their effects, and potential interventions to combat the problem. We collect drug samples from a large set of local markets in Uganda using covert shoppers and employ Raman spectroscopy to test for drug quality. We find that 37 percent of the local outlets sell fake antimalarial drugs. Motivated by a simple model, we conduct a market-level experiment to test whether authentic drugs can drive out fake drugs from the local market. We find evidence of such externalities: the intervention reduced prevalence of substandard and counterfeit drugs in incumbent outlets by half. We also provide suggestive evidence that misconceptions about malaria lead consumers to overestimate antimalarial drug quality, and that opportunistic drug shops exploit these misconceptions by selling substandard and counterfeit drugs. Together, our results indicate that high quality products can drive out low quality ones, but the opposite is true when consumers are less able to infer product quality.

Keywords: ACT, asymmetric information, counterfeit medicine, field experiment, Malaria

JEL Classification: D83, I15, O12

Suggested Citation

Bjorkman Nyqvist, Martina and Svensson, Jakob and Yanagizawa-Drott, David, Can Good Products Drive Out Bad? Evidence from Local Markets for (Fake?) Antimalarial Medicine in Uganda (September 2012). Available at SSRN: https://ssrn.com/abstract=2153555

Martina Bjorkman Nyqvist (Contact Author)

Stockholm School of Economics ( email )

PO Box 6501
Stockholm, 11383
Sweden

Jakob Svensson

Stockholm University - Institute for International Economic Studies (IIES) ( email )

Stockholm, SE-10691
Sweden
+46 8 163 060 (Phone)
+46 8 161 443 (Fax)

Centre for Economic Policy Research (CEPR)

London
United Kingdom

David Yanagizawa-Drott

University of Zurich ( email )

Sch├Ânberggasse 1
Z├╝rich, MA ZH 8001
Switzerland

HOME PAGE: http://Econ.uzh.ch

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