The Estimation of Pharmaceutical Demand Function in the Presence of Price Regulation

Abstract

It has long been pointed out and a serious social concern that there have existed price margins fallen into doctors' hands in the purchase of pharmaceuticals. There have, however, never been empirical studies as regards to the effects of price margin upon excessive demand for pharmaceuticals. In this study, we have estimated the elasticity of demand with respect to price margin and obtained statistically significant results. We found the average elastiticity is larger than unity.