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As a first effort at modeling nonalcoholic beverage demand in a systemwide framework thatincludes bottled water, this article examines the impact of advertising on the demand fornonalcoholic beverages in the United States. We employed an AIDS (almost ideal demandsystem) model of five jointly estimated equations that included advertising expenditures asexplanatory variables to evaluate annual U.S. consumption of nonalcoholic beverages for 1974through 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 inover 50 percent of the cases considered, and such effects can be substantial, particularly foradvertising of soft drinks, and coffee and tea. We find that a large increase in the retail price offluid milk, an increasing trend towards dining out, and positive spillover effects from soft drinkadvertising made significant contributions to bottled water’s success in recent years.

Keywords: advertising ; demand ; elasticity ; nonalcoholic beverages

Subject(s): Demand and Price Analysis

Issue Date: 2008

Publication Type: Journal Article

PURL Identifier: Published in: Agricultural and Resource Economics Review, Volume 37, Number 2 Page range: 147-159

Total Pages: 13

Record appears in: Northeastern Agricultural and Resource Economics Association (NAREA) > Agricultural and Resource Economics Review

Autor: Zheng, Yuqing ; Kaiser, Harry M.


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