Abstract
We measure the impact of direct-to-consumer television advertising (DTCA) by drug manufacturers. Our identification strategy exploits shocks to local advertisingmarkets generated by the political advertising cycle and a regulatory intervention affecting a single product. We find evidence of significant business stealing effects among branded, advertised drugs. In addition, we show positive spillovers from drug advertisements to non-advertised competitors in the same class. We decompose the effect and show it is primarily due to new customers. Finally, we provide evidence that DTCA is cost-effective from a societal standpoint in our setting.
| Original language | English (US) |
|---|---|
| Pages (from-to) | 836-881 |
| Number of pages | 46 |
| Journal | Review of Economic Studies |
| Volume | 86 |
| Issue number | 2 |
| DOIs | |
| State | Published - Mar 1 2019 |
Funding
Acknowledgments. The authors would like to acknowledge the valuable advice and suggestions provided by Jason Abaluck, Ernie Berndt, Patricia Danzon, David Dranove, Uli Doraszelski, Liran Einav, Craig Garthwaite, Brett Gordon, Wes Hartmann, Gunter Hitsch, JF Houde, Tom Hubbard, Ginger Jin, Marc Meredith, Chris Ody, Mike Powell, Katja Seim, Andrew Sfekas, Brad Shapiro, Ashley Swanson, and Bob Town. We would further like to thank workshop participants at Wharton, Boston College, Chicago Booth, Harvard, Yale, Stanford, the Columbia Commuter Strategy Conference, Marketing Dynamics, IIOC, NBER IO, QME, and the Econometric Society for their comments and feedback. M. S. gratefully acknowledges funding from the the Wharton Dean’s Research Funds. A. S. gratefully acknowledges funding from the Leonard Davis Institute.
Keywords
- Advertising and competition
- Analysis of health care markets
ASJC Scopus subject areas
- Economics and Econometrics