Surendra Rajiv

A comment on: "Revisiting dynamic duopoly with consumer switching costs"

A comment on: ‘‘Revisiting dynamic duopoly with consumer switching costs’’ Eric T. Anderson, Nanda Kumar, and Surendra Rajiv Kellogg School of Management, Northwestern University, 2001 Sheridan Road, Evanston, IL 60208, USA School of Management, University of Texas at Dallas, P.O. Box 830688, Richardson, TX 75083-0688, USA NUS Business School, National University of Singapore, BIZ 1, #04-20, 1 Business Link, Singapore 117592

How Direct-to-Consumer Advertising for Prescription Drugs Affects Consumers' Welfare: A Natural Experiment Tests The Impact of FDA Legislation

ABSTRACT In August 1997, the U.S. Food and Drug Administration (FDA) allowed brand-specific advertising on television. A simultaneous rise in direct-to-consumer advertising (DTCA) spending and prescription drug sales has resulted in a heated debate among pharmaceutical firms and medical practitioners, as well as in the U.S. Congress and the popular press. One side claims that DTCA creates demand and higher prices for the advertised brands; the other claims that DTCA increases consumer knowledge. The current study sheds light on the debate with a comparison of consumer welfare before and after the 1997 policy change, using a structural econometric model. The results suggest that DTCA seems to be increasing consumer welfare.