Direct to Consumer Advertising of Pharmaceutical Drugs: Information and Persuasion

34 Pages Posted: 10 Jan 2014

See all articles by Talia Bar

Talia Bar

University of Connecticut - Department of Economics

Dean R. Lillard

Ohio State University (OSU) - Department of Human Sciences

Date Written: January 2014

Abstract

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

Bar, Talia R. and Lillard, Dean R., Direct to Consumer Advertising of Pharmaceutical Drugs: Information and Persuasion (January 2014). NBER Working Paper No. w19794, Available at SSRN: https://ssrn.com/abstract=2377132

Talia R. Bar (Contact Author)

University of Connecticut - Department of Economics ( email )

365 Fairfield Way, U-1063
Storrs, CT 06269-1063
United States

Dean R. Lillard

Ohio State University (OSU) - Department of Human Sciences ( email )

United States

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