Advertising in Specialized Markets: Example from the US Pharmaceutical Industry

Amrita Bhattacharyya ()
Additional contact information
Amrita Bhattacharyya: Boston College, Postal: Dept. of Economics, Boston College, Chestnut Hill, MA 02467 USA

No 610, Boston College Working Papers in Economics from Boston College Department of Economics

Abstract: This paper studies the usefulness of advertising to both consumers and experts in specialized markets like the prescription drugs, travel and real-estate markets where the consumers' purchasing decisions are influenced by the experts (e.g., doctors, travel agents and real-estate agents). Inspired by the features of the prescription drugs market the study shows that direct-to-consumer-advertising (DTCA) does not substitute for advertising directed to physicians even when physician-advertising is only persuasive in nature. Furthermore, the paper analyzes possible advertising equilibriums in a two-firm setting and finds that it is possible to have a sub-game perfect, non-symmetric Nash Equilibrium in which only one firm advertises to the consumers and the other firm becomes a free-rider when, (i) the number of patients who are aware of treatment is very low, and (ii) there are very few patients who insist on a particular drug. Otherwise, for familiar diseases a non-advertising equilibrium is most likely. Finally, consumer advertising can have welfare improving implications depending on the disease types and patient characteristics.

Keywords: advertising; DTCA; prescription; expert; Nash equilibrium (search for similar items in EconPapers)
JEL-codes: I0 L0 M3 (search for similar items in EconPapers)
Pages: 26 pages
Date: 2005-02-28, Revised 2005-11-10
New Economics Papers: this item is included in nep-bec, nep-com, nep-hea and nep-ind
Note: previously circulated as "Advertising in Specialized Markets: Example from the US Pharmaceutical Industry"
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (2)

Downloads: (external link)
http://fmwww.bc.edu/EC-P/wp610.pdf main text (application/pdf)

Related works:
This item may be available elsewhere in EconPapers: Search for items with the same title.

Export reference: BibTeX RIS (EndNote, ProCite, RefMan) HTML/Text

Persistent link: https://EconPapers.repec.org/RePEc:boc:bocoec:610

Access Statistics for this paper

More papers in Boston College Working Papers in Economics from Boston College Department of Economics Boston College, 140 Commonwealth Avenue, Chestnut Hill MA 02467 USA. Contact information at EDIRC.
Bibliographic data for series maintained by Christopher F Baum ().