This paper examines the entry implications of physician advertising. Evidence suggests that advertising inhibits entry into this market. Nevertheless. experienced physicians (incumbents), to whom advertising would offer the greatest financial benefit, in fact advertise less--a paradox that may be explained by nonfinancial concerns, such as unwillingness to break well-internalized professional norms against advertising. Physician advertising has risen sharply in recent years, and it appears that this trend will continue. If incumbents increasingly resort to advertising, there could be a substantial redistribution of income from less-well-established physicians to better-established ones.

Individuals with finite private information independently choose acts and messages. Their utilities may depend on all acts and information, including the center's. Incentive payments are separable and fully transferable. Implementable incentives making specified behavior a Bayesian equilibrium are derived whenever the center's information depends stochastically, however slightly, on all relevant private information, and also whenever individuals' relative valuations of acts, however divergent, are not too dissimilarly affected by different states of nature. Feasibility is resolved whenever the desired strategies reveal the agents' beliefs about the center's information. Key concepts of agent similarity are developed for nonresponsive and budget-balancing cases.

This paper examines the entry implications of physician advertising. Evidence suggests that advertising inhibits entry into this market. Nevertheless. experienced physicians (incumbents), to whom advertising would offer the greatest financial benefit, in fact advertise less--a paradox that may be explained by nonfinancial concerns, such as unwillingness to break well-internalized professional norms against advertising. Physician advertising has risen sharply in recent years, and it appears that this trend will continue. If incumbents increasingly resort to advertising, there could be a substantial redistribution of income from less-well-established physicians to better-established ones.