Abstract
We use Swedish data on consumer choices of medically equivalent drugs to study the zero-price effect, first documented by Shampanier et al. (2007) in experimental settings. The Swedish benefit scheme for pharmaceutical drugs implies that, during a given month, all consumers face the same price differences between generic substitutes, effectively mimicking the setup in earlier experimental studies, and that around one-fifth of the consumers are presented with a zero-price option after their out-of-pocket expenditure exceeds a limit. Using a regression discontinuity design, we find a statistically significant, but relatively small, zero-price effect for the full sample. However, for a subset of consumers who should be less affected by state dependence, we find a much larger zero-price effect.
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