Volume 27, Number 3 (Summer) 1992
Rizzo, John A. and Richard J. Zeckhauser. 1992. "Advertising and the Price, Quantity, and Quality of Primary Care Physician Services." Journal of Human Resources 27(3):381-421.
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.
John A. Rizzo is an assistant professor of public health in the Department of Epidemiology and Public Health at Yale University School of Medicine. Richard J. Zeckhauser is the Frank P. Ramsey Professor of political economy at the John F. Kennedy School of Government, Harvard University. The authors thank three referees, participants in the Boston University-MIT-Harvard joint seminars on health economics, and participants in seminars at the University of Chicago, Johns Hopkins University, and Yale University for helpful comments and suggestions. They also thank Roger Feldman, Richard Frank, Martin Gaynor, Nancy Jackson, Tom Kane, Herbert Klarman, William Marder, David Salkever, Richard Willke, and in particular Jay Patel. Zeckhauser's research was sponsored by the Japanese Corporate Associates Program of the Kennedy School of Government, Harvard. The views expressed in this paper are those of the authors; no official endorsement by Harvard University or Yale University is intended or should be inferred.
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