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 US nonalcoholic beverage market. The Almost Ideal Demand System (AIDS) model reveals that doubling advertising spending rotates the demand curves clockwise for milk, and coffee and tea with associated slope changes of 7 and 12%. Soft-drink advertising rotates its demand curve counterclockwise. Our policy suggestion is that milk and soft-drink firms time advertising to coincide with high-and low-price periods, respectively.
|Number of pages||14|
|State||Published - May 2010|
Bibliographical noteFunding Information:
Funding for this research was provided by the New York State Milk Promotion Advisory Board, and the National Institute for Commodity Promotion Research Evaluation.
ASJC Scopus subject areas
- Economics and Econometrics