Authors: А. Ignatyuk, Doctor of Sciences (Economics), Professor ORCID iD 0000-0002-9103-6943, М. Sobolieva, PhD in Economics Taras Shevchenko National University of Kyiv, Kyiv, Ukraine, М. Saykevich, PhD in Economics, Assосiate Professor Zhytomyr National Agroecological University, Zhytomyr, Ukraine

Abstarct: The article explores the influence of monopoly power, arising from the use of advertising in the pharmaceutical industry, on public welfare: from the standpoint of market equilibrium and the well-being of society (Becker-Murphy model); in terms of consumer equilibrium (Tremblay-Polaski model); from manufacturer’s equilibrium position (model NEIO). Based on these models, an attempt was made to answer the question of the negative or positive impact of non-price competition (for example, advertising) on public welfare.

Key words: advertising, generic products, monopoly power, product hopping, social welfare, pharmaceutical industry.

Received: 08/01/2020

1st Revision: 06/02/2020

Accepted: 20/02/2020



Becker, G. and Merphy, K. 1993. A simple theory of advertising as good or bad. The Quarterly Journal of Economics. Vol. 108, pp. 942-964.

Bergson, A. 1973. On monopoly welfare losses. The American Economic Review, 63, pp. 853-870.

Brendt, E., Mortimer, R., Bhattacharjya A., Parece, A. and Tuttle, E. 2007. Authorized Generic Drugs, Price competition and Consumers’ Welfare. Health Affairs, 26, pp. 790-799.

Carlton, D., Flyer, F. and Shefi, Y. 2016. Does the FTC’s theory of product-hopping promote competition? Journal of Competition Law and Economics, [online] Available at: <> [Accessed 12 July 2016].

Carrier, M. and Shadowen S. 2016. Product hopping: a new framework. Notre Dame Law Review, 92, pp.167-230.

Cheng, J. 2008. Antitrust Analysis of Product Hopping in the Pharmaceutical Industry, Columbia Law Review, 108, pp. 1471-1515.

Dixit, A., Norman, V. 1976. Advertising and Welfare, Bell J. Econ., Spring, 9, 1-17.

Fisher, F. and McGowan, J. 1979. Advertising and welfare: comment. Bell Journal of Economics. pp. 726-727.

FTC files Amicus Brief explaining that pharmaceutical “product hopping” can be the basis for an antitrust lawsuit, [online] Available at: <> [Accessed 11 September 2017].

Harberger, A. 1964. Taxation, resource allocation and welfare, Princeton University Press, pp. 25-80, [online] Available at: < nkn64-4> [Accessed 9 June 2017].

Kamerschen, D. 1996. The estimation of the “welfare losses” from monopoly in the American economy. Economic Inquiry, 4, pp. 221-236.

Kotowitz, Y., Mathewson, F. 1979. Informative advertising and welfare, The American Economic Review, 69, pp. 284-294.

Maudos, J., Cuevara, J.F. 2006. The cost of market power in banking: social welfare loss vs. inefficiency cost, pp. 1-37, available on- line at 1 /MPRA_ paper_15253.pdf

Nichols, L. 1985. Advertising and Economic Welfare, The American Economic Review, Vol. 75, pp. 213-218.

Posner, R. 1975. The social costs of monopoly and regulation. The Journal of Political Economy, Vol. 83, №4, pp.807-828.

Prendergast, G. and Marr, N. 1995. Generic products: who buys them and how do they perform relative to each other? European Journal of Marketing, Vol.31, pp. 94-109.

Scherer, F. M., and Ross D. 1990. Industrial Market Structure and Economic Performance. Boston: Houghton Mifflin Co.

Seigfried, J. and Tiemann T. 1974. The welfare cost of monopoly: An inter-industry analysis. Economic Inquiry, available on-line at     11/j.1465-7295.1974.tb00239.x/full

Stigler, G.J. 1961. The Economics of Information, Journal of Political Economy, 69, pp. 213-225.

Sutton, J. 1992. Sunk Costs and Market Structure: Price Competition, Advertising, and the Evolution of Concentration. Cambridge, MA: MIT Press.

Telser, L. 1964. Advertising and Competition, Journal of Political Economy, 72, 551–567.

Tremblay, C. and Tremblay, V. 1995. Advertising, Price, and Welfare: Evidence from the U.S. Brewing Industry, Southern Economic Journal, 62, pp. 367–381.

Tremblay, V. and Filho C. (forthcoming) A Model of Vertical Differentiation, Brand Loyalty, and Persuasive Advertising, in Michael Baye and Jon Nelson, eds., Advances in Applied Microeconomics: Advertising and Differentiated Products, Vol. 10. JAI Press.

Tremblay, V. and Polasky, S. 2002. Advertising with subjective horizontal and vertical product differentiation. Review of industrial organisation. pp. 253-265.



  • pdf 208-6-11
    File size: 451 kB Downloads: 11