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Estimating Asymmetric Advertising Response: An Application to U.S. Nonalcoholic Beverage Demand

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  • Zheng, Yuqing
  • Kaiser, Harry M.

Abstract

We propose a regime-switching model that allows demand to respond asymmetrically to upward and downward advertising changes. With the introduction of a smooth transition function, the model features smooth rather than abrupt parameter changes between regimes. We apply the model to nonalcoholic beverage data in the United States for 1974 through 2005 to investigate asymmetric advertising response. Results indicate that a decrease in milk advertising had a more profound impact on milk demand than an increase did. An increase in milk advertising had no impact on milk demand, but a decrease could have an own-advertising elasticity up to 0.049.

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Bibliographic Info

Article provided by Southern Agricultural Economics Association in its journal Journal of Agricultural and Applied Economics.

Volume (Year): 40 (2008)
Issue (Month): 03 (December)
Pages:

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Handle: RePEc:ags:joaaec:47262

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Web page: http://www.saea.org/jaae/jaae.htm
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Related research

Keywords: asymmetric advertising response; demand system; negative asymmetry; nonalcoholic beverage demand; positive asymmetry; regime switching; smooth transition function; Agribusiness; Demand and Price Analysis; Food Consumption/Nutrition/Food Safety; C32; M37; Q11;

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  1. Alston, Julian M. & Chalfant, James A. & Piggott, Nicholas E., 2001. "Incorporating demand shifters in the Almost Ideal demand system," Economics Letters, Elsevier, vol. 70(1), pages 73-78, January.
  2. Meyer, Jochen & von Cramon-Taubadel, Stephan, 2002. "Asymmetric Price Transmission: A Survey," 2002 International Congress, August 28-31, 2002, Zaragoza, Spain 24822, European Association of Agricultural Economists.
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Cited by:
  1. Lambert, Remy, 2012. "A Primer on the Economics of Supply Management and Food Supply Chains," Working Papers 125246, Structure and Performance of Agriculture and Agri-products Industry (SPAA).
  2. Xiaoou, Liu, 2009. "Rational Addiction Evidence From Carbonated Soft Drinks," 2009 Conference, August 16-22, 2009, Beijing, China 51620, International Association of Agricultural Economists.

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