The economics of the public option : evidence from local pharmaceutical markets Working paper (Stanford Institute for Economic Policy Research) Atal, Juan Pablo, author. González, Felipe, author. Cuesta, Jose Ignacio, author. Otero, Cristóbal, author. Pharmacies -- economics Public Sector -- economics Cost Savings We study the effects of competition by state-owned firms, leveraging the decentralized entry of public pharmacies to local markets in Chile. Public pharmacies sell the same drugs at a third of private pharmacy prices, because of stronger upstream bargaining and downstream market power in the private sector, but are of lower quality. Public pharmacies induced market segmentation and price increases in the private sector, benefiting the switchers to the public option but harming the stayers. The countrywide entry of public pharmacies would reduce yearly consumer drug expenditure by 1.6 percent, which outweighs the costs of the policy by 52 percent. [Stanford, CA] : Stanford Institute for Economic Policy Research (SIEPR), October 2021 Stanford Institute for Economic Policy Research, issuing body. Technical Report Text Illustrations 1 online resource (1 PDF file (42, xxvi pages)) nlm:nlmuid-9918383986106676-pdf 9918383986106676 http://resource.nlm.nih.gov/9918383986106676 English Chile United States Reproduced with permission of the copyright holder. Further use of the material is subject to CC BY-NC-ND license. https://creativecommons.org/licenses/by-nc-nd/3.0