> Why? If you apply game theory, one of the three will try to defect and undercut the other two.
Because they're playing a repeating game. AbbVie and Merck are big pharma companies. They don't particularly want to get into a price war.
It would be different if a small biotech firm were coming in. They might not get a second shot at it for a long time, so they are much more likely to undercut on price.
Also, three is a low number. Defection is more likely when the number of players goes up.
Of course, they're not going to come in dollar-for-dollar identical to the pricing of Sovaldi and Harvoni. However, the insurance companies seem to be hoping for some really sharp drops in price, which are less likely.
Because they're playing a repeating game. AbbVie and Merck are big pharma companies. They don't particularly want to get into a price war.
It would be different if a small biotech firm were coming in. They might not get a second shot at it for a long time, so they are much more likely to undercut on price.
Also, three is a low number. Defection is more likely when the number of players goes up.
Of course, they're not going to come in dollar-for-dollar identical to the pricing of Sovaldi and Harvoni. However, the insurance companies seem to be hoping for some really sharp drops in price, which are less likely.