An Empirical Test of Two-Part Pricing Through Insurance Sample Clauses

An Empirical Test of Two-Part Pricing Through Insurance. The theory predicts higher deadweight loss from monopoly when rates of insurance are lower. Therefore, eliminating market power in less well-insured markets ought to have greater welfare benefits than in better-insured markets. This result obtains because health insurance allows upstream monopolists to price their products off the consumer demand curve. In this section, we empirically test these two key implications in the market for pharmaceuticals, where patent expiration provides a transparent change in market power for a particular molecular entity. In particular, we predict: (H-1) Better insured molecules display smaller changes in quantity at patent expiration; (H-2) Better insured molecules display larger declines in profits, and thus branded drug revenues, at patent expiration;