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Do Brand Advertising Spillovers Matter?

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  • Xun Li
  • Rigoberto A. Lopez

Abstract

ABSTRACT This article examines the spillover effects of television brand advertising on consumer demand, using carbonated soft drinks as a case study. Spillover effects are modeled using the conventional linear and constant elasticity of substitution (CES) advertising production functions. The latter allows for imperfect substitution between brand advertising and spillovers from advertising all other brands belonging to the same company as well as relaxes the assumption of constant returns to scale. Empirical results confirm strong and positive brand advertising spillover effects across brands belonging to the same company as well as negative spillover effects from advertising by competitors. Empirical results also indicate that the CES advertising production function outperforms the linear function, providing strong support for decreasing returns to scale in advertising and imperfect substitution between brand advertising and advertising of other brands in the same company. Finally, the CES function results in significantly higher estimates of the price elasticities of demand as well as lower estimated markups. [EconLit citations L13, L66, M37].

Suggested Citation

  • Xun Li & Rigoberto A. Lopez, 2015. "Do Brand Advertising Spillovers Matter?," Agribusiness, John Wiley & Sons, Ltd., vol. 31(2), pages 229-242, April.
    • Handle: RePEc:wly:agribz:v:31:y:2015:i:2:p:229-242
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    File URL: http://hdl.handle.net/10.1002/agr.21405
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    Cited by:

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    2. Bo Chen & Wuyang Hu & Qingjie Zhou, 2020. "Effects of local and national advertising across brands: the case of yogurt in China," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 64(4), pages 1260-1281, October.
    3. Xun Li & Rigoberto Lopez & Shuai Yang, 2018. "Energy†milk price transmission at the product brand level," Agricultural Economics, International Association of Agricultural Economists, vol. 49(3), pages 289-299, May.
    4. Zhu, Chen & Lopez, Rigoberto A. & Liu, Xiaoou, 2019. "Consumer responses to front-of-package labeling in the presence of information spillovers," Food Policy, Elsevier, vol. 86(C), pages 1-1.
    5. Kim, GwanSeon & Zheng, Yuqing, 2017. "U.S. Non-alcoholic Beverage Demand: Evidence from AIDS Model with Dynamic Effect," Journal of Agribusiness, Agricultural Economics Association of Georgia, vol. 35(1), April.
    6. He, Qinying & Li, Xun & Wang, Rui, 2018. "Childhood obesity in China: Does grandparents’ coresidence matter?," Economics & Human Biology, Elsevier, vol. 29(C), pages 56-63.

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