Modeling the demand for alcoholic beverages and advertising specifications
In this paper, the demand for beer, wine, spirits and soft drinks in Ontario is modeled in two parts: an equation is specified to endogenize group expenditures and a demand system is set up to allocate budgeted group expenditures across ,types of beverages. Advertising is allowed to influence both the level of group expenditures and its allocation. Three popular advertising specifications are compared using the ]-test and the likelihood dominance criterion. Even though all three specifications fitted well according to standard criteria, the calculated expenditure, price and advertising elasticities were sensitive to the manner with which advertising is specified. This clearly highlights the need to rely on a sound criterion to identify a dominant specification. From the identified dominant specification, we found that advertising has very subtle effects on expenditures on alcoholic beverages (group and individual beverages). Thus, advertising is not effective in enlarging markets and this suggests that firms (especially breweries) use advertising to compete in zero-sum market share games. From a public policy perspective, our results are comforting but future research should investigate whether the neutral effect of advertising on aggregated expenditures hide substantial offsetting changes in the drinking habits of individuals. © 2000 Elsevier Science B.V. All rights reserved.
Volume (Year): 22 (2000)
Issue (Month): 2 (March)
|Contact details of provider:|| Web page: http://www.iaae-agecon.org/|
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Moschini, GianCarlo, 1998. "Semiflexible Almost Ideal Demand System, The," Staff General Research Papers 1193, Iowa State University, Department of Economics.
- Ornstein, Stanley I & Hanssens, Dominique M, 1985. " Alcohol Control Laws and the Consumption of Distilled Spirits and Beer," Journal of Consumer Research, University of Chicago Press, vol. 12(2), pages 200-213, September.
- Heien, Dale, 1995. "The Economic Case against Higher Alcohol Taxes," Journal of Economic Perspectives, American Economic Association, vol. 9(1), pages 207-09, Winter.
- Hogarty, Thomas F & Elzinga, Kenneth G, 1972. "The Demand for Beer," The Review of Economics and Statistics, MIT Press, vol. 54(2), pages 195-98, May.
- Green, Richard D. & Carman, Hoy F. & McManus, Kathleen, 1991. "Some Empirical Methods Of Estimating Advertising Effects In Demand Systems: An Application To Dried Fruits," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 16(01), July.
- Pollak, R.A. & Wales, T.J., 1990.
"The Likelihood Dominance Criterion: A New Approach To Model Selection,"
Discussion Papers in Economics at the University of Washington
90-10, Department of Economics at the University of Washington.
- Pollak, Robert A. & Wales, Terence J., 1991. "The likelihood dominance criterion : A new approach to model selection," Journal of Econometrics, Elsevier, vol. 47(2-3), pages 227-242, February.
- Pollak, R.A. & Wales, T.J., 1990. "The Likelihood Dominance Criterion: A New Approach To Model Selection," Working Papers 90-10, University of Washington, Department of Economics.
- Johnson, James A, et al, 1992. "Short-Run and Long-Run Elasticities for Canadian Consumption of Alcoholic Beverages: An Error-Correction Mechanism/Cointegration Approach," The Review of Economics and Statistics, MIT Press, vol. 74(1), pages 64-74, February.
- Johnson, James A & Oksanen, Ernest H, 1977. "Estimation of Demand for Alcoholic Beverages in Canada from Pooled Time Series and Cross Sections," The Review of Economics and Statistics, MIT Press, vol. 59(1), pages 113-18, February.
- Gallet, Craig A. & List, John A., 1998. "Elasticities of beer demand revisited," Economics Letters, Elsevier, vol. 61(1), pages 67-71, October.
- Tiffin, Richard & Aguiar, Magda, 1995. "Bayesian Estimation of an Almost Ideal Demand System for Fresh Fruit in Portugal," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 22(4), pages 469-80.
- David L. Edgerton, 1997. "Weak Separability and the Estimation of Elasticities in Multistage Demand Systems," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(1), pages 62-79.
- Bruno Larue & Alan Ker & Lorrie Mackinnon, 1991. "The demand for wine in ontario and the phasing-out of discriminatory mark-ups," Agribusiness, John Wiley & Sons, Ltd., vol. 7(5), pages 475-488.
- Moschini, Giancarlo, 1998. "The semiflexible almost ideal demand system," European Economic Review, Elsevier, vol. 42(2), pages 349-364, February.
- Alston, Julian M & Foster, Kenneth A & Green, Richard D, 1994. "Estimating Elasticities with the Linear Approximate Almost Ideal Demand System: Some Monte Carlo Results," The Review of Economics and Statistics, MIT Press, vol. 76(2), pages 351-56, May.
- Tsolakis, Dimitris & Riethmuller, Paul C. & Watts, Geof, 1983. "The Demand for Wine and Beer," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 51(02), August.
- Rickertsen, Kyrre & Chalfant, James A & Steen, Marie, 1995. "The Effects of Advertising on the Demand for Vegetables," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 22(4), pages 481-94.
- Gasmi, Farid & Laffont, Jean-Jacques & Vuong, Quang, 1992.
"Econometric Analysis of Collusive Behavior in a Soft Drink Market,"
IDEI Working Papers
16, Institut d'Économie Industrielle (IDEI), Toulouse.
- Gasmi, F & Laffont, J J & Vuong, Q, 1992. "Econometric Analysis of Collusive Behavior in a Soft-Drink Market," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 1(2), pages 277-311, Summer.
- Alley, Andrew G & Ferguson, Donald G & Stewart, Kenneth G, 1992. "An Almost Ideal Demand System for Alcoholic Beverages in British Columbia," Empirical Economics, Springer, vol. 17(3), pages 401-18.
- Moschini, GianCarlo, 1995. "Units of Measurement and the 'Stone Index' In Demand System Estimation," Staff General Research Papers 5058, Iowa State University, Department of Economics.
- Ryan, David L & Wales, Terence J, 1998. "A Simple Method for Imposing Local Curvature in Some Flexible Consumer-Demand Systems," Journal of Business & Economic Statistics, American Statistical Association, vol. 16(3), pages 331-38, July.
- Henry Saffer, 2000.
"Alcohol Advertising And Motor Vehicle Fatalities,"
The Review of Economics and Statistics,
MIT Press, vol. 79(3), pages 431-442, August.
- Davidson, Russell & MacKinnon, James G., 1993. "Estimation and Inference in Econometrics," OUP Catalogue, Oxford University Press, number 9780195060119.
- Heien, Dale & Pick, Daniel H., 1991. "The Structure Of International Demand For Soybean Products," Southern Journal of Agricultural Economics, Southern Agricultural Economics Association, vol. 23(01), July.
- Richard D. Green & Zuhair A. Hassan & S. R. Johnson, 1995. "Selection of Nonnested Demand Models," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 43(3), pages 485-499, November.
- Chalfant, James A, 1987. "A Globally Flexible, Almost Ideal Demand System," Journal of Business & Economic Statistics, American Statistical Association, vol. 5(2), pages 233-42, April.
- Green, Richard D. & Hassan, Zuhair A. & Johnson, Stanley R., 1995. "Selection of Nonnested Demand Models," Staff General Research Papers 1113, Iowa State University, Department of Economics.
When requesting a correction, please mention this item's handle: RePEc:ags:iaaeaj:175382. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (AgEcon Search)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.