Advertising and Competition in the Ethical Pharmaceutical Industry: The Case of Antihypertensive Drugs
This paper uses data on the majority of name-brand antihypertensive drugs marketed in the United States during 1988-93 to test the hypothesis that advertising decreases the price elasticity of demand in the pharmaceutical industry. This is the first study to directly estimate the effects of drug product promotion on the price elasticity of demand in this industry. We find strong evidence of an advertising effect. In particular, detailing efforts (the salient means for product promotion in this industry) systematically lower price sensitivity. Given the inverse relationship between elasticity of demand and price, it is likely that consumers pay higher prices as a result of the advertising that occurs in this industry. Our findings are thus consistent with Hurwitz and Caves, who find evidence that advertising inhibits entry into this market but in contrast to earlier research that found no anticompetitive effect. Copyright 1999 by the University of Chicago.
If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
As the access to this document is restricted, you may want to look for a different version under "Related research" (further below) or search for a different version of it.
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Hurwitz, Mark A & Caves, Richard E, 1988. "Persuasion or Information? Promotion and the Shares of Brand Name and Generic Pharmaceuticals," Journal of Law and Economics, University of Chicago Press, vol. 31(2), pages 299-320, October.
- Leffler, Keith B, 1981. "Persuasion or Information? The Economics of Prescription Drug Advertising," Journal of Law and Economics, University of Chicago Press, vol. 24(1), pages 45-74, April.
- Comanor, William S, 1986. "The Political Economy of the Pharmaceutical Industry," Journal of Economic Literature, American Economic Association, vol. 24(3), pages 1178-1217, September.
- Telser, Lester G, et al, 1975. "The Theory of Supply with Applications to the Ethical Pharmaceutical Industry," Journal of Law and Economics, University of Chicago Press, vol. 18(2), pages 449-478, October.
- Rizzo, John A & Zeckhauser, Richard J, 1990. "Advertising and Entry: The Case of Physician Services," Journal of Political Economy, University of Chicago Press, vol. 98(3), pages 476-500, June.
- Vernon, John M, 1971. "Concentration, Promotion, and Market Share Stability in the Pharmaceutical Industry," Journal of Industrial Economics, Wiley Blackwell, vol. 19(3), pages 246-266, July.
When requesting a correction, please mention this item's handle: RePEc:ucp:jlawec:v:42:y:1999:i:1:p:89-116. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Journals Division)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.