REVISION: How and When to Use the Political Cycle to Identify Advertising Effects
A central challenge in estimating the causal effect of TV advertising on demand is isolating quasi-random variation in advertising. Political advertising, which topped $14 billion in expenditures in 2016, has been proposed as a plausible source of such variation and thus a candidate for an instrumental variable. We provide a critical evaluation of how and where this instrument is valid and useful across categories. We characterize the conditions under which political cycles theoretically identify the causal effect of TV advertising on demand, highlight threats to the exclusion restriction and monotonicity condition, and suggest a specification to address the most serious concerns. We test the strength of the first stage category-by-category for 274 product categories. For most categories, weak-instrument robust inference is recommended, as first-stage F-statistics are less than 10 for at least 221 of 274 product categories in our benchmark specification. The largest first-stage ...
REVISION: Valuing Brand Collaboration: Evidence From a Natural Experiment
We study complementarities between brands in the context of collaborations across museums. Over the course of our sample, one major museum with a highly recognized brand closed temporarily and sequentially collaborated with two established local museums. With individual panel data on museum memberships around these events, we measure how collaborations affect demand using an empirical framework of complementarities that are newly applied to the branding context. We observe two counter-acting demand patterns. First, customers with no history of buying membership from either museum enter the market, suggesting brand complementarities. Second, a sub-group of customers who previously purchased from either or both of the museums display decreased demand, consistent with brand dilution. Any structural approach that models the demand for collaboration with existing preferences for separate brands fails to create accurate demand predictions. The magnitude of the offsetting forces varies ...
REVISION: Generalizable and Robust TV Advertising Effects
We provide generalizable and robust results on the causal sales effect of TV advertising for a large number of products in many categories. Such generalizable results provide a prior distribution that can improve the advertising decisions made by firms and the analysis and recommendations of policy makers. To provide generalizable results, we base our analysis on a large number of products and clearly lay out the research protocol used to select the products. We characterize the distribution of all estimates, irrespective of sign, size, or statistical significance. To ensure generalizability, we document the robustness of the estimates. First, we examine the sensitivity of the results to the assumptions made when constructing the data used in estimation. Second, we document whether the estimated effects are sensitive to the identification strategies that we use to claim causality based on observational data. Our results reveal substantially smaller advertising elasticities compared ...
REVISION: Promoting Wellness or Waste? Evidence from Antidepressant Advertising
It is taken as given by many policy makers that Direct-to-Consumer Advertising of prescription drugs drives inappropriate patients to treatment. Alternatively, advertising may provide useful information that causes appropriate patients to seek treatment. I study this dynamic in the context of antidepressants. Leveraging variation driven by the borders of television markets, I find that a 10% increase in antidepressant advertising leads to a 0.3% ($32 million) increase in new prescriptions followed by reductions in workplace absenteeism worth about $770 million. I find no effect of advertising on prices, generic penetration, drug switches, adverse effects, non-adherence rates or therapist visits.
REVISION: Advertising in Health Insurance Markets
The effects of television advertising in the market for health insurance are of distinct interest to both firms and regulators. Regulators are concerned about firms potentially using ads to "cream skim," or attract an advantageous risk pool, as well as the potential for firms to use misinformation to take advantage of the elderly. Firms are interested in using advertising to acquire potentially highly profitable seniors. Meanwhile, health insurance is a useful setting to study the mechanisms through which advertising could work. Using the discontinuity in advertising exposure created by the borders of television markets, this study estimates the effects of advertising on consumer choice in health insurance. Television advertising has a small effect on brand enrollments, making advertising a relatively expensive means of acquiring customers. Heterogeneous effects point to advertising being more effective in less healthy counties, which runs opposite to the concern of cream skimming. ...
REVISION: Informational Shocks, Off-Label Prescribing and the Effects of Physician Detailing
The relationship between pharmaceutical detailing and prescriptions for non FDA-approved (off-label) use has been the subject of regulatory scrutiny, with more than $12 billion in regulatory settlements for off-label promotion since 2004. Using the case of AstraZeneca's anti-psychotic drug, Seroquel, I study the extent to which off-label prescriptions are caused by detailing. Using a physician panel that connects detailing exposure to medical charts, I exploit within-physician variation to identify detailing effects. I find the effect of detailing on off-label prescriptions is small in both absolute and relative terms. Detailing on net tilts the prescribing distribution toward on-label.
REVISION: Positive Spillovers and Free Riding in Advertising of Prescription Pharmaceuticals: The Case of Antidepressants
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.
REVISION: Estimating the Cost of Strategic Entry Delay in Pharmaceuticals: The Case of Ambien CR
With the Hatch-Waxman Act of 1984, the FDA included an unchallengeable exclusivity period for newly approved drugs, independent of patents. This potentially generates an incentive for firms to strategically delay the introduction of new versions (reformulations) of drugs until just before patent expiration of the original drug. This way the reformulated drug competes mainly with newly introduced generics of the original drug. If instead, the reformulated drug was to be introduced well before the original drug’s patent expires, the reformulated drug would compete only with the original drug. While the pattern of strategic delay is well documented in the literature, its effects on consumers and firms are not. Reformulations may increase utility through improved efficacy and through fewer doses per day or a more even molecule decay rate. However, as suggested in the press and literature, it is also possible that the adoption of reformulated products is mostly the result of advertising ...