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Measuring and Testing Advertising-Induced Rotation in the Demand Curve

Author

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  • Zheng, Yuqing
  • Kinnucan, Henry W.
  • Kaiser, Harry M.

Abstract

Advertising can rotate the demand curve if it changes the dispersion of consumers' valuations. We provide an elasticity form measure of the advertising-induced demand curve rotation in five demand models and test for its presence in the U.S. non-alcoholic beverage market. The AIDS model reveals that doubling advertising spending rotates the demand curves clockwise for milk, and coffee and tea with associated slope changes of 7.3% and 11.6%. Soft-drink advertising rotates its demand curve counterclockwise. Our policy suggestion is that milk and soft-drink firms might enhance profits by timing advertising to coincide with high- and low-price periods, respectively.

Suggested Citation

  • Zheng, Yuqing & Kinnucan, Henry W. & Kaiser, Harry M., 2007. "Measuring and Testing Advertising-Induced Rotation in the Demand Curve," 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon 9938, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    • Handle: RePEc:ags:aaea07:9938
    DOI: 10.22004/ag.econ.9938
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    Cited by:

    1. Luis A Sandoval & Carlos E Carpio & Marcos Sanchez-Plata, 2019. "The effect of ‘Traffic-Light’ nutritional labelling in carbonated soft drink purchases in Ecuador," PLOS ONE, Public Library of Science, vol. 14(10), pages 1-18, October.
    2. Jinghua Xie & Dengjun Zhang, 2014. "Imperfect Competition and Structural Changes in the US Salmon Import Market," Marine Resource Economics, University of Chicago Press, vol. 29(4), pages 375-389.
    3. Okrent, Abigail M. & MacEwan, Joanna P., 2014. "The Effects of Prices, Advertising, Expenditures, and Demographics on Demand for Nonalcoholic Beverages," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 43(1), pages 1-22, April.
    4. Zhai, Tianchang & Li, Lei & Wang, Jingjing & Si, Wei, 2022. "Will the consumption tax on sugar-sweetened beverages help promote healthy beverage consumption? Evidence from urban China," China Economic Review, Elsevier, vol. 73(C).
    5. Xin Xu & Jayachandran N Variyam & Zhenxiang Zhao & Frank J Chaloupka, 2014. "Relative Food Prices and Obesity in U.S. Metropolitan Areas: 1976-2001," PLOS ONE, Public Library of Science, vol. 9(12), pages 1-22, December.
    6. Okrent, Abigail M. & MacEwan, Joanna P., 2014. "The Effects of Prices, Advertising, Expenditures, and Demographics on Demand for Nonalcoholic Beverages," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 0, pages 1-22.

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    Keywords

    Demand and Price Analysis;

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