2011 Dick Wittink Prize

The Dick Wittink Prize Committee is pleased to announce the 2011 winner of the 5th Annual Dick Wittink prize for the best paper published in the Quantitative Marketing and Economics journal.

Winner

Switching costs, experience goods and dynamic price competition (PDF) by Toker Doganoglu

I analyze a dynamic duopoly with an infinite horizon where consumers are uncertain about their potential satisfaction from the products and face switching costs. I derive sufficient conditions for the existence of a Markov Perfect Equilibrium (MPE) where switching takes place each period. I show that when switching costs are sufficiently low, the prices in the steady state are lower than what they would have been when they are absent. This result is in contrast to those found in the literature. In the presence of low switching costs competition can be fiercer.

Honorable Mention

The effects of detailing on prescribing decisions under quality uncertainty (PDF) by Andrew Ching and Masakazu Ishihara

Motivated by recent empirical findings on the relationship between new clinical evidence and the effectiveness of detailing, this paper develops a new structural model of detailing and prescribing decisions under the environment where both manufacturers and physicians are uncertain about drug qualities. Our model assumes (1) a representative opinion leader is responsible for updating the prior belief about the quality of drugs via consumption experiences and clinical trial outcomes, and (2) manufacturers use detailing as a means to build/maintain the measure of physicians who are informed of the current information sets. Unlike previous learning models with informative detailing, our model directly links the effectiveness of detailing to the current information sets and the measures of well-informed physicians. To illustrate the empirical implications of the new model, we estimate our model using a product level panel data on sales volume, prices, detailing minutes, and clinical trial outcomes for ACE-inhibitors with diuretics in Canada. Using our estimates, we demonstrate how the effectiveness of detailing depends on the information sets and the measures of well-informed physicians. Furthermore, we conduct a policy experiment to examine how a public awareness campaign, which encourages physicians/patients to report their drug experiences, would affect managerial incentives to detail. The results demonstrate that the empirical and managerial implications of our model can be very different from those of previous models. We argue that our results point out the importance of developing a structural model that captures the mechanism of how detailing/advertising conveys information in the market under study.