Theory predicts intense price competition results when firms cluster with rivals. Yet, strong evidence of clustering is found in previous empirical research. Researchers typically measure clustering by comparing observed location patterns to random assignment. The random assignment benchmark...

We estimate a model of drug demand and supply that incorporates insurance, advertising, and competition between branded and generic drugs within and across therapeutic classes. We use data on antiulcer drugs from 1991 to 2010. Our simulations show that generics and “me-too” drugs each...