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Advertising as a Signaling Device in the Swedish Pharmaceuticals Market

Author

Listed:
  • Hellström, Jörgen

    (Department of Economics, Umeå University)

  • Rudholm, Niklas

    (Department of Economics, Umeå University)

Abstract

The paper empirically studies whether pharmaceutical firms uses advertising as a signal for high quality drugs. A nested random effects count data hurdle model is introduced to handle the excess number of zero observations in the sample as well as nested random drug, firm and substance specific effects. The empirical study indicate that drug quality (measured as the number of side-effects) do not influence pharmaceutical firms decision to advertise or not, but do affect the number of ads in a given period. The higher quality of the drug the more ads.

Suggested Citation

  • Hellström, Jörgen & Rudholm, Niklas, 2003. "Advertising as a Signaling Device in the Swedish Pharmaceuticals Market," Umeå Economic Studies 612, Umeå University, Department of Economics.
    • Handle: RePEc:hhs:umnees:0612
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    References listed on IDEAS

    as
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    More about this item

    Keywords

    Signaling; pharmaceutical industry; advertising; product quality; nested random effects; count data;
    All these keywords.

    JEL classification:

    • L15 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Information and Product Quality
    • L21 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - Business Objectives of the Firm

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    This paper has been announced in the following NEP Reports:

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