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Working Paper
“Free” Internet Content: Web 1.0, Web 2.0, and the Sources of Economic Growth
The Internet has evolved from Web 1.0, with static web pages and limited interactivity, to Web 2.0, with dynamic content that relies on user engagement. This change increased production costs significantly, but the price charged for Internet content has generally remained the same: zero. Because no transaction records the ?purchase? of this content, its value is not reflected in measured growth and productivity. To capture the contribution of the ?free? Internet, we model the provision of ?free? content as a barter transaction between the content users and the content creators, and we value ...
Working Paper
The Role of Information in Pharmaceutical Advertising: Theory and Evidence
This paper theoretically and empirically examines the role of information in the practice of pharmaceutical detailing (promotional interactions between drug representatives and physicians). We start with a theoretical framework in which pharmaceutical firms target detailing visits to physicians who potentially learn about drug quality and prescribe it to their patients. We derive several predictions about the role of information in these visits, which we then test empirically using Medicare Part D prescriptions and pharmaceutical detailing visit data. We find there is little empirical ...
Working Paper
Is Sales Tax Included in the Price? Consumer Inattention and Price Competition
Sales tax is generally not included in the advertised price quoted to consumers in the United States. In contrast, value added taxes (VAT) are embedded into the price in most other countries. This article investigates how the two different pricing structures and consumers' decision-making process affect the intensity of price competition. The two pricing structures yield identical market outcomes with fast-computing consumers who are willing and able to recompute the exact sales tax each time there is a price change. With slow-computing consumers, prices and profits are higher when sellers ...