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Advertising and the Price, Quantity, and Quality of Primary Care Physician Services

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  • John A. Rizzo
  • Richard J. Zeckhauser

Abstract

Physician advertising has increased dramatically during the past decade, and this trend seems likely to continue. This paper examines the impact of such advertising on the price, quantity, and quality of primary care physician services. Unlike earlier research on the effect of advertising in the professions, our study attempts to control for possible selection effects. The results suggest that physicians may advertise in order to obtain more desirable (for example, wealthier and less price-sensitive) patients. Consistent with this view, we find that advertising leads to higher price and quality (the latter measured as time spent per patient office visit) and lower total patient visits. Had we not controlled for selection effects, advertising would appear to have lowered the price of physician services significantly. The results of this study suggest that future research on the price effects of advertising should control for potential selection factors.

Suggested Citation

  • John A. Rizzo & Richard J. Zeckhauser, 1992. "Advertising and the Price, Quantity, and Quality of Primary Care Physician Services," Journal of Human Resources, University of Wisconsin Press, vol. 27(3), pages 381-421.
    • Handle: RePEc:uwp:jhriss:v:27:y:1992:i:3:p:381-421
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    Cited by:

    1. Camille Chaserant & Sophie Harnay, 2013. "The regulation of quality in the market for legal services: Taking the heterogeneity of legal services seriously," European Journal of Comparative Economics, Cattaneo University (LIUC), vol. 10(2), pages 267-291, August.
    2. Joel Waldfogel & Jeffrey Milyo, 1999. "The Effect of Price Advertising on Prices: Evidence in the Wake of 44 Liquormart," American Economic Review, American Economic Association, vol. 89(5), pages 1081-1096, December.
    3. Rizzo, John A, 1999. "Advertising and Competition in the Ethical Pharmaceutical Industry: The Case of Antihypertensive Drugs," Journal of Law and Economics, University of Chicago Press, vol. 42(1), pages 89-116, April.
    4. Stivers, Andrew & Tremblay, Victor J., 2005. "Advertising, search costs, and social welfare," Information Economics and Policy, Elsevier, vol. 17(3), pages 317-333, July.
    5. Martin Gaynor, 1994. "Issues in the Industrial Organization of the Market for Physician Services," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 3(1), pages 211-255, March.
    6. Laura Vallejo-Torres & Stephen Morris, 2018. "Primary care supply and quality of care in England," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 19(4), pages 499-519, May.
    7. Frank H. Stephen, 2013. "Lawyers, Markets and Regulation," Books, Edward Elgar Publishing, number 14803.
    8. B. Wolfe & S. Zuvekas, "undated". "Nonmarket outcomes of schooling," Institute for Research on Poverty Discussion Papers 1065-95, University of Wisconsin Institute for Research on Poverty.
    9. Bagwell Kyle & Lee Gea M, 2010. "Advertising Competition in Retail Markets," The B.E. Journal of Economic Analysis & Policy, De Gruyter, vol. 10(1), pages 1-38, August.
    10. Robert H. Haveman & Barbara L. Wolfe, 2002. "Social and nonmarket benefits from education in an advanced economy," Conference Series ; [Proceedings], Federal Reserve Bank of Boston, vol. 47(Jun), pages 97-142.
    11. Mitchell, Jean M. & Sass, Tim R., 1995. "Physician ownership of ancillary services: Indirect demand inducement or quality assurance?," Journal of Health Economics, Elsevier, vol. 14(3), pages 263-289, August.
    12. Hendrik Jürges & Vincent Pohl, 2012. "Medical guidelines, physician density, and quality of care: evidence from German SHARE data," The European Journal of Health Economics, Springer;Deutsche Gesellschaft für Gesundheitsökonomie (DGGÖ), vol. 13(5), pages 635-649, October.
    13. Stroka, Magdalena A., 2021. "Regional variation in the supply of general and medical practitioners and its consequences for inpatient service utilization," Ruhr Economic Papers 877, RWI - Leibniz-Institut für Wirtschaftsforschung, Ruhr-University Bochum, TU Dortmund University, University of Duisburg-Essen.

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