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Advertising in consumer allocation models: choice of functional form

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  • Martyn Duffy

Abstract

This study investigates the empirical performance of four different functional forms for advertising-augmented consumer allocation models. The investigation is carried out within the context of the UK alcoholic drinks markets. The aims of the study are twofold: (i) to assess which of the four functional forms provides the best explanation of the data and may serve, therefore, as the most suitable framework for investigating advertising effects in these markets; and (ii) to consider whether the findings with regard to advertising effects are robust and consistent across model specifications. Advertising is found to have had no significant effect upon the 'product composition' or 'level' of total alcoholic drink consumption in the UK over the period from 1964 to 1996, and this result is robust with respect to variations in the specification of functional form. The consumption of alcoholic drink is affected by relative prices, total consumer budgeted expenditures and, to some extent, by autonomous shifts in tastes. The balance of the evidence from tests for functional form appeared to favour the Almost Ideal Demand system as a framework for investigating the influence of advertising and other factors on drink consumption.

Suggested Citation

  • Martyn Duffy, 2001. "Advertising in consumer allocation models: choice of functional form," Applied Economics, Taylor & Francis Journals, vol. 33(4), pages 437-456.
  • Handle: RePEc:taf:applec:v:33:y:2001:i:4:p:437-456
    DOI: 10.1080/00036840121721
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    References listed on IDEAS

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    1. Kristian S. Palda, 1964. "The Measurement of Cumulative Advertising Effects," The Journal of Business, University of Chicago Press, vol. 38, pages 162-162.
    2. K.W. Clements & P.B. McLeod & E.A. Selvanathan, 1985. "Does Advertising Affect Drinking and Smoking?," Economics Discussion / Working Papers 85-02, The University of Western Australia, Department of Economics.
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    Cited by:

    1. Duffy, Martyn, 2003. "Advertising and food, drink and tobacco consumption in the United Kingdom: a dynamic demand system," Agricultural Economics, Blackwell, vol. 28(1), pages 51-70, January.
    2. Duffy, Martyn, 2003. "Advertising and food, drink and tobacco consumption in the United Kingdom: a dynamic demand system," Agricultural Economics of Agricultural Economists, International Association of Agricultural Economists, vol. 28(1), January.
    3. Henry Saffer & Dhaval Dave, 2006. "Alcohol advertising and alcohol consumption by adolescents," Health Economics, John Wiley & Sons, Ltd., vol. 15(6), pages 617-637.
    4. Camilo Sarmiento & Richard Just, 2005. "Empirical modelling of the aggregation error in the representative consumer model," Applied Economics, Taylor & Francis Journals, vol. 37(10), pages 1163-1175.
    5. Saroja Selvanathan, 2006. "How similar are alcohol drinkers? International evidence," Applied Economics, Taylor & Francis Journals, vol. 38(12), pages 1353-1362.
    6. Adrian R. Fleissig, 2016. "Changing Trends in U.S. Alcohol Demand," Atlantic Economic Journal, Springer;International Atlantic Economic Society, vol. 44(3), pages 263-276, September.
    7. Martyn Duffy, 2006. "Tobacco consumption and policy in the United Kingdom," Applied Economics, Taylor & Francis Journals, vol. 38(11), pages 1235-1257.
    8. Duffy, Martyn, 2003. "On the estimation of an advertising-augmented, cointegrating demand system," Economic Modelling, Elsevier, vol. 20(1), pages 181-206, January.
    9. Nelson, Jon P., 2001. "Alcohol Advertising and Advertising Bans: A Survey of Research Methods, Results, and Policy Implications," Working Papers 7-01-2, Pennsylvania State University, Department of Economics.

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