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Advertising and Entry: The Case of Physician Services

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  • Rizzo, John A
  • Zeckhauser, Richard J

Abstract

This paper examines the entry implications of physician advertising. Evidence suggests that advertising inhibited entry into this market. Nevertheless, experienced physicians (incumbents), to whom advertising would offer the greatest financial benefit, in fact advertise less--a paradox that may be explained by nonfinancial concerns, such as unwillingness to break well-internalized professional norms against advertising. Physician advertising has risen sharply in recent years and it appears that this trend will continue. If incumbents increasingly resort to advertising, there could be substantial redistribution of income from less-well-established physicians to better-established ones. Copyright 1990 by University of Chicago Press.

Suggested Citation

  • 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.
  • Handle: RePEc:ucp:jpolec:v:98:y:1990:i:3:p:476-500
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    Cited by:

    1. Ignatius Horstmann & Sridhar Moorthy, 2003. "Advertising Spending and Quality for Services: The Role of Capacity," Quantitative Marketing and Economics (QME), Springer, vol. 1(3), pages 337-365, September.
    2. Geroski, P. A., 1995. "What do we know about entry?," International Journal of Industrial Organization, Elsevier, vol. 13(4), pages 421-440, December.
    3. Geroski, Paul A & Mazzucato, Mariana, 2001. "Advertising and the Evolution of Market Structure in the US Car Industry," CEPR Discussion Papers 2860, C.E.P.R. Discussion Papers.
    4. Rizzo, John A, 1999. "Advertising and Competition in the Ethical Pharmaceutical Industry: The Case of Antihypertensive Drugs," Journal of Law and Economics, University of Chicago Press, vol. 42(1), pages 89-116, April.
    5. Robert Bloomfield & Vrinda Kadiyali, 2005. "How Verifiable Cheap-Talk Can Communicate Unverifiable Information," Quantitative Marketing and Economics (QME), Springer, vol. 3(4), pages 337-363, December.
    6. Gaynor, Martin, 1994. "Issues in the Industrial Organization of the Market for Physician Services," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 3(1), pages 211-255, Spring.
    7. Jason R. Barro & Michael Chu, 2002. "HMO Penetration, Ownership Status, and the Rise of Hospital Advertising," NBER Working Papers 8899, National Bureau of Economic Research, Inc.

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