Speaker: Ana Evdokimova
Title: Over-the-Counter Drugs Market: Information Distortion In Label Design
Abstract: "In the OTC pharmaceutical market, labels are a crucial source of information that guides consumers' choices. Current label design allows pharmaceutical companies to convey differentiated effectiveness values to consumers; products with the biological formula are represented as different. Scanner data shows how information distortion leads to markup extraction because consumers cannot identify the drugs with the same effectiveness. In addition, survey data supports the fact that information distortion comes from the inability of the consumers to identify the drugs that carry the same effectiveness. This project aims to quantify the loss in the consumer surplus that comes from this misconception and construct a welfare-enhancing label design for OTC drugs. Preliminary results from the experiment suggest that the variation in information processing costs can explain the initial variation in information distortion levels. Label modification that achieves the lowest level of information distortion directly signals to consumers which products have the same efficacy rather than informing them about the content of the active component."