Positive Spillovers and Free Riding in Advertising of Prescription Pharmaceuticals: The Case of Antidepressants

57 Pages Posted: 10 Aug 2014 Last revised: 8 Jul 2018

Bradley Shapiro

University of Chicago - Marketing Management

Date Written: June 23, 2016

Abstract

Exploiting the discontinuity in advertising along the borders of television markets, I estimate that television advertising of prescription antidepressants exhibits significant positive spillovers on rivals' demand. I apply this identification in a demand model, where estimated parameters indicate significant and persistent spillovers driven by market expansion. Using the demand estimates to calibrate a stylized supply model, I explore the consequences of the positive spillovers on firm advertising choice. Compared with a competitive benchmark in which firms optimally free ride, simulations suggest a category-wide advertising cooperative would produce a significant increase in total advertising.

Keywords: Advertising, Spillovers, Pharmaceuticals, DTCA

JEL Classification: L13, M37

Suggested Citation

Shapiro, Bradley, Positive Spillovers and Free Riding in Advertising of Prescription Pharmaceuticals: The Case of Antidepressants (June 23, 2016). Journal of Political Economy, Volume 126, Issue 1, February 2018. Available at SSRN: https://ssrn.com/abstract=2477877 or http://dx.doi.org/10.2139/ssrn.2477877

Bradley Shapiro (Contact Author)

University of Chicago - Marketing Management ( email )

Chicago, IL 60637
United States

HOME PAGE: http://www.chicagobooth.edu/faculty/directory/s/bradley-shapiro

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