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Direct to Consumer Advertising of Pharmaceutical Drugs: Information and Persuasion


  • Talia Bar
  • Dean R. Lillard


We formally model direct to consumer advertising (DTCA) of prescription drugs and examine factors that determine a pharmaceutical firm's DTCA strategy. We highlight how the profitability of DTCA varies with the characteristics of the condition that the advertised drug treats, the incidence of the condition, and the signal value of symptoms, and risk factors. We account for the potential information benefits from DTCA as well as its potential to persuade consumers. From a welfare perspective there can be too much or too little private investment in advertising. Welfare is more likely to increase when the population is uninsured.

Suggested Citation

  • Talia Bar & Dean R. Lillard, 2014. "Direct to Consumer Advertising of Pharmaceutical Drugs: Information and Persuasion," NBER Working Papers 19794, National Bureau of Economic Research, Inc.
  • Handle: RePEc:nbr:nberwo:19794
    Note: HE IO

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    References listed on IDEAS

    1. Brekke, Kurt R. & Kuhn, Michael, 2006. "Direct to consumer advertising in pharmaceutical markets," Journal of Health Economics, Elsevier, vol. 25(1), pages 102-130, January.
    2. Rosemary Avery & Donald Kenkel & Dean R. Lillard & Alan Mathios, 2006. "Private Profits and Public Health: Does Advertising Smoking Cessation Products Encourage Smokers to Quit?," NBER Working Papers 11938, National Bureau of Economic Research, Inc.
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    Cited by:

    1. Hosken, Daniel & Wendling, Brett, 2013. "Informing the uninformed: How drug advertising affects check-up visits," International Journal of Industrial Organization, Elsevier, vol. 31(2), pages 181-194.

    More about this item

    JEL classification:

    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L65 - Industrial Organization - - Industry Studies: Manufacturing - - - Chemicals; Rubber; Drugs; Biotechnology; Plastics
    • M37 - Business Administration and Business Economics; Marketing; Accounting; Personnel Economics - - Marketing and Advertising - - - Advertising

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