Competing Doctors, Antibiotic Use, and Antibiotic Resistance in Taiwan∗

Antibiotics are a cornerstone of modern medicine, but antibiotic resistance increas-ingly threatens to erode their effectiveness. The emergence of drug-resistant pathogens is a negative externality associated with antibiotic use. Many patients, who do not in-ternalize this social cost, prefer physicians who casually prescribe antibiotics. If offering these drugs increases demand, physicians may respond to competition by prescribing antibiotics more frequently. This paper examines the effect of competition in outpatient health care markets on antibiotic use in Taiwan. In a large, nationally representative dataset of outpatient visits, an increase in competition of one standard deviation raises antibiotic use by up to 2.4 percent. Using patient and physician fixed effects, an inter-action with a policy to limit antibiotic use, and an interaction with patient age cohorts, we provide evidence of an effect of competition on prescription, rather than a spurious correlation. The paper then calibrates the relationship between antibiotic use and resis-tance to estimate the effect of competition on this outcome. An increase in competition of one standard deviation elevates resistance by up to 11.5 percent, leading to $1.3