Calzolari, Giacomo Ichino, Andrea Manaresi, Francesco Nellas, Viki
Year of Publication:
IZA Discussion Papers 8490
We investigate empirically how sellers react to changes in the population of their consumers, identifying the effects of demand composition and demand size with limited information on costs. We show how pharmacists in Italy selectively increase the price of some products when they observe in their cities an exogenous influx of parents of newborns, conceivably less elastic buyers as compared with other more experienced and less pressed consumers. Exploiting population based laws that fix the number of pharmacies in a city, we use RDD to measure the effect of competition on sellers' ability to extract surplus from less elastic buyers.
demand elasticity consumer's information price competition pharmacies regression discontinuity