Advertising in Specialized Markets: Example from the US Pharmaceutical Industry
Amrita Bhattacharyya ()
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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
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: L0 M3 I0 (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"
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Persistent link: https://EconPapers.repec.org/RePEc:boc:bocoec:610
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