Brand Name Preference May Relate to Product Knowledge, Say University of Chicago Economists

AUGUST 05, 2013
University of Chicago economists turned to pharmacists, nurses, and doctors when testing whether preference for brand or generic OTC medicines is related to knowledge.

“We came up with what is probably the simplest idea you’ve ever heard of,” said Matthew Gentzkow, Richard O. Ryan Professor of Economics at The University of Chicago, in a July 5 article featured on NPR. “Let’s just look and see if people who are well informed about these things still pay extra to buy brands.”

After surveying 6 years of purchasing data from the Nielsen Homescan panel, researchers matched the data to a survey with consumer information proxies and separate data on store-level quantities and prices. They were then able to determine the purchasing habits of consumers from various educational backgrounds, income levels, and levels of product expertise.

Their findings showed pharmacists purchased generic headache remedies 90% of the time, whereas the overall population tended to purchase generic headache remedies approximately 70% of the time, NPR reported.

“In a world where everyone was as well informed as [the] pharmacist or nurse, the market share of the brands would be much, much smaller than it is today,” Gentzkow told NPR.

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