Dynamic Market-Level Effects of Highly Regulated Advertising Messages



In this paper, we examine the dynamic effectiveness of Direct-to-Consumer Advertising (DTCA) in a market where regulations impose restrictions on the type and content of prescription pharmaceutical advertising. We identify three issues that should be of managerial interest: Whether DTCA is a reasonable option to choose under these regulations. If so, which type of DTCA is more effective, and when? We investigate these issues by examining data on new and refill prescriptions for a novel pharmaceutical through the implementation of an Augmented Kalman Filter with continuous state and discrete observations (AKF(C-D)), a combination of Extended Kalman Filter (EKF) and adaptive filter. The findings suggest the presence of strong advertising dynamics as well as differences in the effects on new and refill prescriptions for two types of regulation-induced advertising messages. 
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Dr. S. Puntoni