Advertising Spillovers: Drug Detailing in Combination Therapy
University of Connecticut
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
Date posted: March 8, 2014
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