TY  - JOUR
AU  - David,Guy
AU  - Markowitz,Sara
TI  - Side Effects of Competition: the Role of Advertising and Promotion in Pharmaceutical Markets
JF  - National Bureau of Economic Research Working Paper Series
VL  - No. 17162
PY  - 2011
Y2  - June 2011
UR  - http://www.nber.org/papers/w17162
L1  - http://www.nber.org/papers/w17162.pdf
N1  - Author contact info:
Guy David
The Wharton School
University of Pennsylvania
202 Colonial Penn Center
3641 Locust Walk
Philadelphia, PA 19104-6218
Tel: 215/573-5780
Fax: 215/573-2157
E-Mail: gdavid2@wharton.upenn.edu

Sara Markowitz
Department of Economics
Emory University
1602 Fishburne Dr.
Atlanta, GA 30322
Tel: (404) 712-8167
E-Mail: sara.markowitz@emory.edu
AB  - The extent of pharmaceutical advertising and promotion can be characterized by a balancing act between profitable demand expansions and potentially unfavorable subsequent regulatory actions. However, this balance also depends on the nature of competition (e.g. monopoly versus oligopoly). In this paper we model the firm’s behavior under different competitive scenarios and test the model’s predictions using a novel combination of sales, promotion, advertising, and adverse event reports data. We focus on the market for erectile dysfunction drugs as the basis for estimation.  This market is ideal for analysis as it is characterized by an abrupt shift in structure, all drugs are branded, the drugs are associated with adverse health events, and have extensive advertising and promotion. We find that advertising and promotion expenditures increase own market share but also increase the share of adverse drug reactions. Competitors’ spending decreases market share, while also having an influence on adverse drug reactions.
ER  -