Doctoral Dissertation Research in Economics: Empirical Tests of Asymmetric Information in the Pharmaceutical Retail Market

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This award funds research conducted by doctoral candidate Anne Fitzpatrick under the guidance of Dr. Rebecca Thornton. The project seeks to determine the role of pharmaceutical retailers in the sale of counterfeit drugs. The research will ascertain whether retailers know which drugs within their stock are counterfeit, and whether they can make different purchasing decisions and avoid purchasing counterfeit stock.The research includes several rounds of data collection at over 500 drug vendors that sell anti-malarial drugs in an area where malaria is a serious public health problem. An audit study will determine the prevalence of counterfeit drugs and whether or not the vendors are aware they are selling counterfeits; the study achieves this goal by comparing purchases from anonymous shoppers to purchases from shoppers who announce that their purchases will subjected to quality testing. A randomized controlled trial will be conducted as well; this trial will test the effects of an incentive scheme that gives the retailers incentives to avoid counterfeits. Economic theory predicts that the incentive scheme will have the desired effect, so the project also tests key hypotheses about seller incentives to provide quality products.The broader impact of the project comes from the eventual use of the research results. The project could result in a workable solution to curb the worldwide sale of counterfeit pharmaceuticals.