Advertising Spillovers: Drug Detailing in Combination Therapy

Hongju Liu

University of Connecticut

Qiang Liu

Purdue University - Krannert School of Management

Pradeep K. Chintagunta

University of Chicago

February 28, 2014

A growing literature has investigated various sources of advertising spillovers. Spillover can be across markets within a brand, across related brands within a firm, across rival brands, and across media and channels. Using the empirical context of combination therapy in the pharmaceutical industry, we examine advertising spillovers when products from different firms are consumed as a bundle. With data from the HIV/AIDS category, we first provide reduced-form evidence for the nature of relationships that exist among the various drugs. We then estimate a formal hierarchical Bayesian logit model across treatment regimens to investigate how the detailing effort for one drug spills over to related drugs. Spillover effects create a tradeoff for the firm – increased detailing of one’s own drug benefits sales of that drug but also those of other drugs in the combination. The latter effect could lead to free riding by the drug benefitting from the spillover. We numerically solve a dynamic oligopoly detailing game to study this tradeoff and firms’ optimal detailing strategies. We focus on situations in which firms have incentives to free ride on others’ detailing efforts, and examine how the incentive for free riding is affected by regulations and market structure.

Number of Pages in PDF File: 46

Keywords: pharmaceutical marketing, combination therapy, advertising, spillover, dynamic oligopoly game

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Date posted: March 8, 2014  

Suggested Citation

Liu, Hongju and Liu, Qiang and Chintagunta, Pradeep K., Advertising Spillovers: Drug Detailing in Combination Therapy (February 28, 2014). Available at SSRN: http://ssrn.com/abstract=2406363 or http://dx.doi.org/10.2139/ssrn.2406363

Contact Information

Hongju Liu (Contact Author)
University of Connecticut ( email )
2100 Hillside Rd, U-1041
Storrs, CT 06269-1063
United States
Qiang Liu
Purdue University - Krannert School of Management ( email )
1310 Krannert Building
West Lafayette, IN 47907-1310
United States
Pradeep K. Chintagunta
University of Chicago ( email )
5807 S. Woodlawn Avenue
Chicago, IL 60637
United States
773-702-8015 (Phone)
773-702-0458 (Fax)
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