This paper investigates whether aggregate consumer learning together with consumer heterogeneity in price sensitivity could explain why (i) there is a slow diffusion of generic drugs into the market, and (ii) brand-name originators keep increasing their prices over time even after the number of...

Efforts to reduce inefficient healthcare spending are prevalent across the developed world. Among available policy options, the substitution of brand name for generic drugs is of particular interest because it can deliver large savings without objective quality sacrifices. These policies are...