Stiff Competition

The introduction of Viagra a few years ago and its resulting success in the marketplace has resulted in the entry of other competitors like Cialis and Levitra. I think everybody will agree that the product they are peddling is homogeneous that is, it is really the same thing. As in any group of products of the same characteristics, producers would want to separate their product from the rest either by providing more information about it to the public (through advertisement) or through product differentiation by claiming quality differences (supplying more quality if you will-even if it's just in the imagination). Firm theory will tell us that a producer will increase supply of quality if the marginal consumer values this extra quality which means marginal revenue for the producer of that extra unit of quality (true or not) is also non-negative. Firms constrained in the pricing strategy side of marketing will opt to compete in the quality dimension.

The stuff they came up with are interesting if not entertaining. Cialis claims it's effective for up to 36 hours and users can "relax and take their time." Levitra does not mince words and claims they provide a higher "erection quality." Which to them means this. No wonder Saturday Night Live came up with a spoofed version of the ads. The interesting thing about the ads are that they target women too with women spokesperson and all. In essence ED drugs have some "public good" component to it. Consumption of one party does not necessarily mean that party alone gets to get utility from the good. Viagra has countered though with a promo ala Starbucks where they offer the 7th prescription for free.