Advertising Expenditures and the Consumption of Alcoholic Beverages

The theory of consumer behavior is applied to the estimation of a demand svstem. Monthly data on alcoholic beverages (beer, wine, liquor, soft dhnks) from the province of Ontario in Canada are analyzed. Before estimating the linear approximate almost ideal demand system (LA/AIDS), unit root and cointegration tests are implemented. Budget shares, per capita advertising expenditures, real total expenditure, prices and per capita consumption are found to be non-stationary. The budget share, the advertising expenditures, the prices and the real total expenditure are cointegrated for each beverage. Own and cross-price elasticities, income elasticities and own and cross-advertising elasticities are calculated from the estimated or the demand system. Based on own-price elasticities and income elasticities, alcohol consumption is consistent with the law of demand and the products analyzed are normal goods. The estimation of income and advertising effects is important for analyzing the need for, and the effectiveness of, potential control policies. The advertising elasticities are small but statistically significant. This suggests that advertising may promote alcoholic beverage consumption. The estimated inelastic demands for beer and wine suggest that the primary purpose of high excise taxes levied by the Federal and Provincial governments is to raise government revenues and not to discourage consumption.     

An Empirical Assessment of Endogeneity Issues in Demand Analysis for Differentiated Products

This article explores the issue of price and expenditure endogeneity in empirical demand analysis. The analysis focuses on the U.S. carbonated soft drink market. We test the null hypothesis that price and expenditures are exogenous in the demand for carbonated soft drinks. Using an almost ideal demand system (AIDS) specification, we strongly reject exogeneity for both prices and expenditures. We find that accounting for price/expenditures endogeneity significantly impacts demand elasticity estimates. We also evaluate the implications of endogeneity issues for testing weak separability.     

Testing for pre‐committed quantities of Australian meat demand

Pre‐committed consumption represents the portion of demand that is determined by non‐price and non‐income factors. This study uses quarterly data to estimate a Generalised Almost Ideal Demand System (GAIDS) to test for the existence of pre‐committed meat consumption in Australia. Two specifications are estimated to evaluate the impact of seasonal and time trend factors on pre‐committed demand. Evidence is found for the existence of pre‐committed chicken consumption when jointly estimated with seasonal and time trend factors. Results support improved demand modelling of Australian meat consumption using the GAIDS and provide insights into how Australian meat demand is affected by price, expenditures, pre‐committed consumption, seasonality, and trends.     

Levels Versions of the Rotterdam Demand Model and Incorporation of Demographic, Stock and Other Nonprice, Nonincome variables

Nonprice, nonincome variables are incorporated into a levels version of the Rotterdam model through scaling, translation, combined scaling-translation and an approach suggested by Theil. In a study of advertising effects on grapefruit and other juice demands, the combined scaling-translation specification is accepted against an unrestricted specification, while the other specifications are rejected.     

An econometric analysis of demand for food quantity and quality in urban China

This article offers an analytical framework for studying consumer demand for food quality based on a theory‐consistent demand model, namely, the Exact Affine Stone Index specification. Importantly, it accounts for unobserved consumer and regional heterogeneity, and allows for arbitrary Engel curves. The empirical value of our framework is illustrated in an econometric analysis of demand for food quality in China. Evaluating possible structural changes in consumer food expenditures in China is of paramount importance, given the ever‐increasing global role of China and the implications of the structural food preference changes for the global food system. The major findings emerging from this study indicate that income is an important determinant of demand for food quality and quantity with the relatively more affluent provinces having a higher affinity for food quality.     

Advertising and food, drink and tobacco consumption in the United Kingdom: a dynamic demand system

This paper tests for the influence of advertising on the inter‐product distribution of consumer demand for non‐durable goods and services in the UK, 1963–1996. The long‐run demand for seven categories of non‐durable products is modelled through an advertising‐augmented version of the almost ideal demand system (AIDS), which is incorporated into an error‐correction model to allow for short‐run dynamic adjustments to long‐run equilibrium positions. Model estimates confirm that the restrictions of price homogeneity and symmetry appear to be consistent with the data, yield measures of the various types of demand elasticity that are in general plausible, confirm the strong influence of prices on the allocation of consumer expenditure, but find little evidence to support the hypothesis that advertising has the power to effect marked changes in the inter‐product pattern of consumer demand in the UK.     

Disaggregated econometric estimation of consumer demand response by alcoholic beverage types

The paper presents estimates of price elasticities of demand for 12 disaggregated alcoholic beverages in Australia: premium beer, full strength beer, low alcohol beer and mid‐strength beer; red bottled wine, white bottled wine, sparkling wine, cask wine; dark and light ready‐to‐drink (RTD); and dark and light spirits. These disaggregated categories correspond closely to the commodities of interest to public policymakers with respect to taxation and health policies. The system of demand equations is estimated with Nielsen's data using a semiflexible Almost Ideal Demand System model in order to impose negative semi‐definiteness on the demand parameters. Results indicate elastic own‐price elasticities for virtually all commodities. Cross‐price elasticities suggest that beverages most linked with negative externalities, namely full strength beer, dark RTD and dark spirits, may need to be taxed jointly. Any proposed tax increase to cask wine may also result in consumers shifting demand to more undesirable beverages. The elasticity estimates are used to illustrate the effect of a hypothetical change towards taxation equalisation based on alcohol content. These elasticities offer crucially needed inputs for analysing any tax change policies.     

Assessing the Effectiveness of Fluid Milk Advertising in Ontario

Advertising is a marketing tool used to a significant degree by the Ontario Milk Marketing Board. In this research, the effectiveness of the advertising campaign is evaluated using a time-series demand system model of the cold, nonalcoholic beverage market in Ontario. The results of the analysis suggest that increasing advertising expenditure on fluid milk would increase fluid milk revenue net of advertising costs to the dairy industry. Fluid milk demand is little affected by advertising of other goods in the market but does affect the demand for other beverages. La publicité est un outil de commercialisation amplement utilisé par ?Office de la Commercialisation du Lait de ?Ontario. Cette étude utilise un système de demande basé sur des données chronologiques des breuvages non alcoolisés en Ontario, afin ?évaluer ?efficacité de la campagne publicitaire sur le lait de consommation. Les résultats de ?analyse montrent que ?augmentation des défenses publicitaires sur le lait de consommation augmenteraient le revenu net de ?industrie laitiere. La demande de lait nature est peu affectée par la publicité sur les autres biens sur le marché, mais elle affecte la demande des autres breuvages.     

Beggar-Thy-Neighbor Advertising: Theory and Application to Generic Commodity Promotion Programs

Profits from generic advertising by a producer group often come partly at the expense of producers of closely related commodities. The resulting tendency toward excessive advertising is exacerbated by check-off funding. To analyze this beggar-thy-neighbor behavior we compare a scenario where different producer groups cooperate and choose their advertising expenditures jointly to maximize the sum of profits across the groups, and a scenario where they optimize independently. In an illustrative example using 1998 data for U.S. beef and pork, the noncooperatively chosen expenditure on beef and pork advertising is more than three times the cooperative optimum.     

WEAK SEPARABILITY AND A TEST FOR THE SPECIFICATION OF INCOME IN DEMAND MODELS WITH AN APPLICATION TO THE DEMAND FOR MEAT IN AUSTRALIA*

Most studies of the demand for meat in Australia have used some measure of total income or expenditure, but two recent studies have assumed weak separability of a meat group and used expenditure on the meat group instead. These specification differences are of interest to the extent that they affect the economic interpretation, goodness-of-fit, elasticity estimates, predictive performance or hypothesis tests in empirical demand equations. In this paper, non-nested hypothesis testing procedures are used to test the alternative specifications of the income variable and the hypothesis of separability. The results favour the use of the expenditure variable implied by separability but are mixed concerning whether separability holds.     

Spanish Demand for Food Away from Home: Analysis of Panel Data

We analyse the Spanish demand for food away from home (FAFH). A panel dataset is built and appropriate techniques for estimating limited dependent variable models are applied. Results indicate that where there are zero expenditures, these are largely due to infrequency of purchase rather than to abstention, or for economic reasons. Furthermore, important differences appear among households. Households whose head is a highly educated person, male, young and living on a salary in a large town is more likely to purchase FAFH. FAFH expenditure responses to an increase in total per capita expenditure are markedly different depending on the age of the household's head, their employment status and also the size of the resident's town. The lowest elasticity is shown by single‐person households, between 36 and 55 years old, employed and living in large towns, for whom FAFH has become a necessity. On the other hand, FAFH remains a luxury for unemployed couples with one or two children.     

Nondiscretionary residential water use: the impact of habits and water‐efficient technologies

Several studies published in the last few decades have demonstrated a low price‐elasticity for residential water use. In particular, it has been shown that there is a quantity of water demanded that remains constant regardless of prices and other economic factors. In this research, we characterise residential water demand based on a Stone‐Geary utility function. This specification is not only theory‐compatible but can also explicitly model a minimum level of consumption not dependent on prices or income. This is described as minimum threshold or nondiscretionary water use. Additionally, the Stone‐Geary framework is used to model the subsistence level of water consumption that is dependent on the temporal evolution of consumer habits and stock of physical capital. The main aim of this study is to analyse the impact of water‐saving habits and water‐efficient technologies on residential water demand, while additionally focusing attention on nondiscretionary uses. This is informed by an empirical application using data from a survey conducted among residents of Brisbane City Council, Australia. The results will be especially useful in the design of water tariffs and other water‐saving policies.     

Modelling outcome‐related risk in choice experiments

In this study, we introduce information on outcome‐related risk as an additional attribute in a choice model of preferences for a land‐based climate change mitigation project. We provide a comprehensive comparison of different model specifications arising from different behavioural assumptions about the way that respondents process information on outcome‐related risk within the choice task. We find significant differences between several specifications in terms of both model fit and WTP estimates. The behavioural assumptions made when choosing a particular model specification, and reasons that motivate them should be made explicit, and consequences of using different specifications should not be ignored.     

Revisiting Aggregate U.S. Meat Demand with a Bayesian Averaging of Classical Estimates Approach: Do We Need a More General Theory?

Although meat demand is one of the most studied issues in agricultural economics, our understanding of this phenomenon has been hampered by valid concerns about model specification uncertainty. This article revisits the need for more general theories of aggregate U.S. meat demand. Using a Bayesian averaging of classical estimates approach, we draw comprehensive inferences over 1,048,576 demand systems. We find very little evidence supporting the need for more general theories that include demand determinants beyond prices and expenditures. We find strong evidence in support of symmetry and negativity, but strong evidence against homogeneity, which is consistent with other research.     

Food scares, advertising, and the demand for meat cuts in Great Britain

Retail demand systems for 19 different cuts of meat for beef, lamb, pork, bacon and poultry in Great Britain are estimated from monthly time series of consumer expenditure from 1989-2000 using a two stage budget allocation process and an LA/AIDS specification. The unconditional expenditure, own and cross price elasticities are derived for the individual meat cuts. The impact of adverse publicity from meat scares, especially BSE, and of positive publicity through consumer promotion and advertising are incorporated into the modelling. Meat scares produced a reallocation of consumer spending from red to white meats during the 1990s. The impact of species-based advertising was shown to have complex spillover effects both within and between meat species, and the response of consumer demand to advertising was considerably less than to adverse publicity.     

Market imperfections,access to information and technology adoption in Uganda: challenges of overcoming multiple constraints

Limited empirical evidence exists on how multiple binding constraints influence the adoption of improved technologies by smallholder farmers. This article uses the case of groundnut variety adoption in Uganda to investigate the role of information, seed supply, and credit constraints in conditioning technology uptake. New data from a household survey in seven groundnut growing districts (n = 945) indicate that 8% of farmers lack information on new varieties, while 18% and 6% of farmers, respectively, cannot adopt mainly due to seed supply and capital constraints. A tobit‐type specification that considers all nonadopters as being uninterested in the technology (i.e., corner solutions) would lead to inconsistent parameter estimates and incorrect conclusions in this context. We therefore estimate a modified multi‐hurdle specification of demand for new varieties, taking into account how information, seed supply, and capital constraints jointly determine adoption probability and intensity. The study reveals new empirical insights on why agricultural technology adoption in Africa has lagged behind: slow uptake is not mainly due to a lack of economic incentives, but rather a reflection of information, seed supply, and credit constraints that prevent farmers from translating their desired demand into adoption of modern varieties. Policy implications are discussed.     

Industry Structure and Economic Performance in the Food Manufacturing Industries

The objective of this study is to develop a simultaneous equations model of profitability, concentration, advertising expenditures and research and development outlays for the food manufacturing indushies in the United States. The data used in the estimation are subjected to regression diagnostics in an effort to determine the importance to the estimation results of a subset of the data that can have a disproportionate influence. The estimation results, especially for the advertising expenditures relationship and the research and development outlays equation, do change when a truncated data sample (based on the omission of the outliers) is used. This serves partly to explain why there is some disagreement in the literature on market structure and economic performance with regard to the impact of several economic factors.     

Generic Advertising and Product Differentiation

This article considers whether generic advertising lowers the differentiation among competing brands of the same good. Analytical results show that if the benefits from generic advertising from increased demand are outweighed by the costs from lower product differentiation then high–quality producers will not benefit from generic promotion. Hypotheses are tested empirically under a conditional–logit approach using retail–market sales and advertising data for the U.S. prune industry. Results from this study provide evidence that generic advertising has a slight differential effect on the perceived qualities of different brands.     

Crossbred cow adoption and its correlates: Countable adoption specification search in Sri Lanka's small holder dairy sector

Considerable specification choice confronts countable adoption investigations and there is need to measure, formally, the evidence in favor of competing formulations. This article presents alternative countable adoption specifications—hitherto neglected in the agricultural‐economics literature—and assesses formally their usefulness to practitioners. Reference to the left side of de Finetti's (1937) famous representation theorem motivates Bayesian unification of agricultural adoption studies and facilitates comparisons with conventional binary‐choice specifications. Such comparisons have not previously been considered. The various formulations and the specific techniques are highlighted in an application to crossbred cow adoption in Sri Lanka's small‐holder dairy sector.     

An assessment of the current structure of food demand in urban China

We evaluate the current structure of food demand in urban China by using household expenditure survey data from five provinces. Two complementary analyses are undertaken. First, an aggregate analysis based on a fractional logit model is used to examine how households allocate food expenditures across the food‐at‐home (FAH) and food‐away‐from‐home (FAFH) categories. This is followed by a disaggregated analysis of how households allocated their FAH expenditures across 12 commodity categories. A Quadratic Almost Ideal Demand System (QUAIDS) is used. We find evidence of significant food purchase substitution and complementarity.