ISSR Scholar Mentor Seminar | "Consumer Observational Learning among Brands and Generics considering Strategic Supply" joint with Mariana Carrera

We empirically investigate the welfare effects of providing information to consumers about their peers' choices for generic products vis a vis the brand name products in the over the counter (OTC) pharmaceutical category in a field experiment. In a first step using pre and post experimental data, we estimate structural random utility demand models separately for the pain, allergy and digestive relief categories and assume that the labels affect utility linearly. Second, given demand and assuming strategic supply retail pricing behavior we estimate welfare changes due to the information treatments in counterfactual scenarios. We reject the notion that our experimental shelf labels uniformly increased consumers attention. Instead, we detect label specific informative effects across both peer rate treatments that suggest our shelf labels rotated consumer demand for OTC products. Specifically, we estimate that the labeling treatment led to an increased valuation for the pain category when the label features the generic peer rate, while it had no significant effect when the label featured the brand peer rate. Our findings are consistent with customers valuing those labels and updating their beliefs about the quality of generic products from learning what their peers' generic purchase rate is.

Sofia Villas-Boas is a professor in the Department of Agricultural and Resource Economics at U. C. Berkeley. She holds the Class of 1934 Robert Gordon Sproul Chair in Agricultural Economics. She has published in top economics and field journals such as Review of Economic Studies, Rand Journal of Economics, American Journal of Agricultural Economics, Journal of Environmental Economics and Management, Marketing Science, Management Science, and Review of Economics and Statistics.

This seminar is co-sponsored by the Institute for Social Science Research and the Department of Resource Economics at the University of Massachusetts, Amherst. The ISSR Scholars Program promotes successful research and grants development for social science faculty across UMass Amherst. Dr. Villas-Boas joins us at UMass in support of her mentorship of ISSR Scholar Christoph Bauner (Resource Economics).