Advertising and U.S. Nonalcoholic Beverage Demand

Agricultural and Resource Economics Review, 2008, vol 37, issue 2, pp. 147-159

28 Pages Posted: 29 Aug 2008 Last revised: 13 Mar 2009

See all articles by Yuqing Zheng

Yuqing Zheng

University of Kentucky - College of Agriculture - Department of Agricultural Economics

Harry M. Kaiser

Cornell University - School of Applied Economics and Management

Date Written: August 28, 2008

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% 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 effect from soft-drink advertising made significant contributions to bottled water's success in recent years.

Keywords: advertising, demand, elasticity, nonalcoholic beverages

JEL Classification: Q11, M37

Suggested Citation

Zheng, Yuqing and Kaiser, Harry M., Advertising and U.S. Nonalcoholic Beverage Demand (August 28, 2008). Agricultural and Resource Economics Review, 2008, vol 37, issue 2, pp. 147-159. Available at SSRN: https://ssrn.com/abstract=1260194

Yuqing Zheng (Contact Author)

University of Kentucky - College of Agriculture - Department of Agricultural Economics ( email )

Lexington, KY 40546
United States

Harry M. Kaiser

Cornell University - School of Applied Economics and Management ( email )

248 Warren Hall
Ithaca, NY 14853
United States
607-255-1598 (Phone)
607-254-4335 (Fax)

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