Why Doesn't Everybody Buy Cheap Generic Headache Medicine

"Why does anyone buy Bayer aspirin — or Tylenol, or Advil — when, almost always, there's a bottle of cheaper generic pills, with the same active ingredient, sitting right next to the brand-name pills?"

"Matthew Gentzkow, an economist at the University of Chicago's Booth school, recently tried to answer this question. Along with a few colleagues, Gentzkow set out to test a hypothesis: Maybe people buy the brand-name pills because they just don't know that the generic version is basically the same thing."

"'We came up with what is probably the simplest idea you've ever heard of,' Gentzkow says. 'Let's just look and see if people who are well-informed about these things still pay extra to buy brands.'"