A factor analysis approach to measure the biased effects of retail fruit juice advertising

This study presents a structural factor analysis approach to measure the impact of advertising on consumer demand. It is assumed that advertising affects the latent perception of consumers, which in turn influences their purchasing behavior. This study investigates the relationship between consumer purchases and retail store advertising (i.e., newspaper advertising, in-store display, and point-of-purchase display) of three fruit juices using an extended Rotterdam model. The results show that the demand for orange juice and grapefruit juice was affected by their own advertising, while the demand for apple juice was only affected by advertising of competitive juices.The authors are a Senior Econometrician, TRS Risk Management, American Express Company; and a Research Economist, Florida Department of Citrus, and Adjunct Professor, Food and Resource Economics Department, University of Florida, respectively.The authors thank B. Dixon, A. Reynolds, S. Shonkwiler, H. Theil, K. Young, editor, and other anonymous reviewers for comments and suggestions. The usual disclaimer applies. This study was partially supported by the McKethan-Matherly Eminent Scholar Chair at the University of Florida.