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Advertising and U. S. Nonalcoholic Beverage Demand

Published online by Cambridge University Press:  15 September 2016

Yuqing Zheng  and
Harry M. Kaiser
Yuqing Zheng
Affiliation:
Applied Economics and Management, respectively, in the Department of Applied Economics and Management at Cornell University in Ithaca, New York
Harry M. Kaiser
Affiliation:
Applied Economics and Management, respectively, in the Department of Applied Economics and Management at Cornell University in Ithaca, New York
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Abstract

As a first effort at modeling nonalcoholic beverage demand in a systemwide framework that includes bottled water, this article examines the impact of advertising on the demand for nonalcoholic beverages in the United States. We employed an AIDS (almost ideal demand system) model of five jointly estimated equations that included advertising expenditures as explanatory variables to evaluate annual U. S. consumption of nonalcoholic beverages for 1974 through 2005. Results suggest that advertising increases demand for fluid milk, soft drinks, and coffee and tea, but not for juice or bottled water. Advertising spillover effects occur in over 50 percent of the cases considered, and such effects can be substantial, particularly for advertising of soft drinks, and coffee and tea. We find that a large increase in the retail price of fluid milk, an increasing trend towards dining out, and positive spillover effects from soft-drink advertising made significant contributions to bottled water's success in recent years.

Keywords

advertisingdemandelasticitynonalcoholic beverages
Type
Contributed Papers
Information
Agricultural and Resource Economics Review , Volume 37 , Issue 2 , October 2008 , pp. 147 - 159
Copyright
Copyright © 2008 Northeastern Agricultural and Resource Economics Association 

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