Science, Pathogenic Outbreak & Market Structure: Evidence from India’s 2010 Superbug Crisis in The Antibiotics market
Associate Professor in Business Policy & Economics | ICICI Bank Chair in Strategic Management | Indian Institute of Management, Ahmedabad | Visiting Fellow, Hoover Institution, Stanford University. Long Bio here.
Chatterjee is an associate professor in economics and business policy at IIM Ahmedabad (IIMA), where he is the ICICI Bank Chair in Strategic Management. He is also, Chairperson of the Center for Management of Healthcare Services at IIMA. He is also a Visiting Fellow at the Hoover Institution at Stanford University. His work is published in Rand Journal of Economics, Journal of Health Economics, Research Policy, Production and Operations Management, Journal of Business Ethics, Journal of Law and Economics, Social Science and Medicine among other peer reviewed journals. More details on him can be found here. He tweets @chiruchat.
Tuesday 2 June 2020
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Abstract: What is the relationship between science and market structure? We answer this question using the natural experiment of the NDM-1 (New Delhi Metallo-Beta-Lactamase 1) superbug discovery in India reported in August 2010 in Lancet Infectious Diseases. This article showed that NDM-1 superbug was resistant to the broad spectrum antibiotic carbapenem, widely recognized as a weapon of last resort against infectious bacterial diseases. Using a difference in differences strategy, we find that multinational firms reduced their market share in sales of carbapenems (treatment group) in India compared to narrow-spectrum antibiotics (control group) immediately after the NDM-1 2010 discovery. We also document a concurrent shift in the prescription behaviour of physicians and associated shift in channel incentives. Our results are robust to pre-trends, alternative controls and while accounting for regional heterogeneity. They are also consistent with synthetic controls. Our findings have implications both for the a priori information revealing role of science for resolving managerial uncertainty within firms and for ex post role of social planners in correcting market failures, especially in healthcare markets.
Joint work with Mayank Aggarwal & Anindya Chakrabarti.
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