Advertising and US alcoholic beverage demand: system-wide estimates

The effects of advertising on consumption of alcoholic beverages in the US are analysed. The goal is to obtain evidence on the importance of advertising at the level of beverage demand(beer, wine, spirits) and for total consumption of alcohol (per capita gallons of ethanol). A three-equation conditional demand system is estimated that includes own- and cros-beverage advertising as explanatory variables. Four models of the differential demand system are estimated, including the Rotterdam, AID, CBS, and NBR models, using annual US data for the period 1964-90 on beverage consumption, prices, expednitures, and real advertising. Estimates are obtained of the complete matrix of own- and cross-elascities for each beverage’ price and advertising. At the beverage level, the results indicate a positive butr very small effect of advertising on beverage consumption, with most of the impact due to wine advertising and non due to beer advertising. There is no efect of advertising in the composite demand function for alcohol. Hence, the results from system-wide modelling suggest that alcohol advertising serves to reallocate brand sales, with no effect on total ethanol consumption and very small effects on beverage consumption.     

Alcohol consumption and alcohol advertising bans

The purpose of this paper is to empirically examine the relationship between alcohol advertising bans and alcohol consumption. Most prior studies have found no effect of advertising on total alcohol consumption. A simple economic model is provided which explains these prior results. The data set used in this study is a pooled time series of data from 20 countries over 26 years. The empirical model is a simultaneous equations system which treats both alcohol consumption and alcohol advertising bans as endogenous. The primary conclusions of this study are that alcohol advertising bans decrease alcohol consumption and that alcohol consumption has a positive effect on the legislation of advertising bans. The results indicate that an increase of one ban could reduce alcohol consumption by 5% to 8%. The alcohol price elasticity is estimated at about 0.2. The results suggest that recent exogenous decreases in alcohol consumption will decrease the probability of enactment of new bans and undermine the continuance of existing bans. Canada, Denmark, New Zealand and Finland have recently rescinded alcohol advertising bans. Alcohol consumption in these countries may increase or decrease at a slower rate than would have occurred had advertising bans remained in place.     

Advertising bans and product demand: how does marketing affect demand for a differentiated product?

Applied economists have made extensive use of product category time series studies to investigate the effects that an advertising ban might have on markets for potentially harmful products such as tobacco and alcohol. This paper argues that such studies can cast little light on the question, partly because they contain no plausible hypothesis of how advertising influences demand in a market for differentiated products. This paper extracts such an hypothesis from literature on the psychology of consumer behaviour, and uses it in simple economic model of a differentiated product market. The analytical results are sensitive to the precise assumptions made about the competitive structure of the market. This apparently negative conclusion is an important warning against making over-generalized predictions about the effects of an advertising ban. Finally, the paper makes several proposals about how its hypothesis could be tested empirically.     

Advertising and Restrictions in the Cigarette Industry: Evidence of State-by-State Variation

Many studies estimate the relationship between advertising and consumption in the cigarette industry, with emphasis directed toward the national demand for cigarettes. However, in light of evidence that cigarette producers price discriminate across U.S. states, coupled with possible affects of advertising on market power, this article takes a less aggregate perspective by addressing the role of cigarette advertising and restrictions at the state level. The results show that although advertising has little effect on demand, it generally increases market power in the cigarette industry (particularly during periods of heightened advertising restrictions). Furthermore, the relationship between advertising, demand, and supply vary across states. (JEL L13 , L66 , I18 )     

State monopolies and alcoholic beverage consumption

Fifteen states have state monopolies to regulate the retail distribution of distilled spirits or wine. One objective of state ownership is the reduction of consumption. However, previous research supports both no effect and a negative effect of state monopoly (control) states on consumption.Using improved data on prices, this paper provides a mixture of classical and Bayesian estimates of beverage-specific demand functions. The analysis is carried out at the state level for the year 1982. Independent variables include the real own-price, substitute prices, income, tourism activity, religious sentiment, youth proxy, and several regulatory measures including monopoly control, bans on price advertising, minimum legal drinking age, and restrictions on the number and type of retail outlets.The results indicate no direct effect of monopoly control on consumption that is separate from effects manifested by higher prices or, for beer, limited outlets. Furthermore, average prices are not significantly greater in the monopoly states. Several possible explanations are advanced to explain these results, including the likelihood that the higher transaction costs in the monopoly states are a tax on consumption of alcohol.     

Alcohol consumption,censorship and misjudgement

In the study of the economic determinants of alcohol consumption, there is an under-appreciated issue of sample selectivity as consumption is often not fully observed. Sample selectivity involves ignoring consumption below a censorship cut-off level. This article estimates a demand system for beer, wine and spirits with and without allowance for selectivity. Then using a simulation approach, it examines the impact of misjudgement in the censorship level on the estimated demand parameters. A mean squared error (MSE) criterion is suggested for determining the appropriate censorship level.     

THE IMPACT OF CIGARETTE ADVERTISING ON CONSUMER SURPLUS, PROFIT, AND SOCIAL WELFARE

This study estimates the effect of U.S. cigarette advertising on social welfare. Because economists hold different beliefs about the nature of advertising, the analysis uses three different empirical models to test the welfare implication of cigarette advertising. Each model employs estimates of a demand equation and a supply relation to calculate a single point estimate of the impact of advertising on profit, consumer surplus, and total surplus. Bootstrapping generates confidence intervals for each welfare estimate. The results indicate that the cigarette industry is not competitive and that advertising significantly increases market power. Further, advertising significantly reduces consumer surplus if it is either purely persuasive or purely informative but has no significant effect on total surplus.     

Cross-country alcohol consumption comparison: an application of the Rotterdam demand system

This paper analyses the consumption patterns of the three beverages beer, wine and spirits in nine countries, Australia, Canada, Finland, Japan, New Zealand, Norway, Sweden, the UK and the US, using the Rotterdam demand system. A cross-country comparison of the results shows that in most countries (i)wine consumption has grown at a fasteer rate than beer and spirits; (ii) the proportion of consumers' expenditure on alcohol is declining; (iii)beer is a necessity and spirits is a luxury; (iv)the demand for the three beverages is price inelastic; and (iv)all three beverages are pair-wise substitutes. We also investigated the hypothesis of identical parameters for all countries by pooling the data across countries and found that the data do not support the hypothesis.     

Advertiser pressure and control of the news: The decline of muckraking revisited

Many scholars argue that advertiser influence prevents commercial news media from reporting truthfully on harmful business practices. Yet overt evidence of advertiser influence on the news can be elusive, partly because fear of offending advertisers may lead news organizations to censor themselves. An apparent departure from self-censorship, however, is the anti-business reporting that characterized the muckraking era of the early 20th century. We therefore examine muckraking's demise as a case study of potential advertiser influence. As alternative hypotheses of muckraking's decline, our tests seek to distinguish between an advertising boycott and a fall in reader demand for muckraking content. The tests involve comparing market performances of muckraking and non-muckraking magazines, and estimating the determinants of advertising in muckraking magazines. We generally find no evidence to support the hypothesis of an advertising boycott.     

ALCOHOL REGULATION AND DOMESTIC VIOLENCE TOWARDS CHILDREN

In recent years, economists have paid much attention to the demand for alcohol and the negative externalities associated with excessive drinking. Largely ignored in the literature is the link between alcohol use and domestic violence. Given the established positive relationship between alcohol consumption and acts of violence, the purpose of this paper is to examine the role that changes in the determinants of the demand for alcohol may play in reducing the incidence of violence aimed at children. Data on violence come from the 1976 Physical Violence in American Families survey. We estimate a model in which violent outcomes are affected by the state excise tax rate on beer; illegal drug prices, and other regulatory variables such as availability measures and laws restricting the advertising of alcohol. Results show that increasing the tax on beer can be an effective policy tool in reducing violence. Laws designed to make obtaining beer more difficult also may be effective in reducing violence, while restrictions on advertising and increases in illegal drug prices have no effects.     

Economic and demographic factors in Australian alcohol demand

In the last two decades, total (pure) alcohol consumption in Australia has declined by about 31% and currently it is at the same level as it was in the 1950s. Australians consumed about 10 litres of pure alcohol per person in 1982 and now the level has declined to about 7 litres of pure alcohol per person. During the last four decades, per capita beer consumption has reached a peak of 140 litres in 1975 and has fallen to a low 93 litres in 1999; wine consumption has increased four-fold while spirits consumption has stayed around the same level. This paper, using the Australian consumption data for beer, wine and spirits for the period 1956–1999, aims to explain the change in consumption patterns of beer, wine and spirits by considering the effects due to changes in economic and demographic factors. The results show that while income and prices significantly influence the consumption patterns of alcohol, the increasing Australian elderly population also plays an important role.     

Re-examining the economic determinants of alcohol consumption in Canada: controlling for the presence of common correlated effects

Alcoholic beverages represent both an important source of revenue and a driver of expenditure for provincial governments in Canada. As a result, the pricing of alcoholic beverages has substantial public policy implications. In this context, we re-examine existing work estimating the demand for three classes of alcoholic beverage (beer, wine, and spirits) by controlling for common correlated effects. The results reveal that any conclusions regarding the government’s ability to influence alcohol consumption is sensitive to the assumption that the relationship between the demand for alcoholic beverages and economic variables is identical across provinces.     

ADVERTISING RESTRICTIONS AND CIGARETTE SMOKING: EVIDENCE FROM MYOPIC AND RATIONAL ADDICTION MODELS

Because of the high social cost of cigarette smoking, many countries impose advertising restrictions to reduce cigarette consumption. Yet previous studies conclude that advertising constraints have been ineffective at reducing cigarette smoking. This conclusion is incorrect because it ignores the fact that advertising restrictions have supply as well as demand effects. The authors extend existing research by showing that advertising regulations, especially those found in the recent National Tobacco Settlement, have decreased the equilibrium level of cigarette consumption in the United States, a result that holds for both myopic and rational addiction models. (JEL L50, L66, M37 )     

Bowling alone, drinking together

This paper investigates to what extent youth alcohol consumption depends on consumption patterns by other household members and on social interactions outside the household. Exploiting the richness of the data, we explore the possibility of asymmetric social influences by gender and by age, the differences between use and abuse and among different types of alcohol consumption (beer, wine and spirits). Moreover, we control for contextual effects, such as variables related to neighbourhood and family background. We find that both the drinking intensity by other household members and a richer social life outside home are positively related to alcohol consumption. We also find that siblings are more influential than parents, that the mother is more influential for females and the father for males.     

A model of advertising with application to the German automobile industry

This paper develops a dynamic duopolistic model of advertising and price competition. Advertising accumulates a stock of goodwill which enters directly into the demand functions and both the cooperative and predatory effects of advertising are considered. It is shown that firms invest more in advertising the higher the degree of cooperativeness of advertising and some comparative static results are provided. In the second, empirical part of the article, estimations of the demand equations are presented using data from the German automobile industry. The main conclusion drawn is that advertising plays an important role in this market and has a predatory nature.     

Estimating demand function parameters of mobile applications

The vibrant market for mobile applications has raised awareness of several professional and also voluntary software developers. The key question especially for professional developers is how to improve the profit gained with a developed app. Recent research provided evidence on the factors that determine the demand of a mobile app. This paper presents a procedure to estimate demand function parameters that are required for developing pricing, advertising and also product update strategies. More specifically, the procedure estimates an app’s maximal willingness to pay, demand elasticity on price and network value. The procedure is based on the Fulfilled Expectations Cournot Model and requires knowledge about the apps being considered as substitutes to each other. It is applied to a data set consisting of download rank data of Apple iPhone apps.     

Economic determinants of the consumption of alcoholic beverages in Canada: a panel data analysis

In this article, the economic determinants of the demand for three alcoholic beverages (wine, spirits, and beer) are investigated with a focus on the price, income and unemployment effects. The investigation is conducted within the fixed effects panel regression framework using a balanced panel for ten Canadian provinces spanning the years 1981–2004. The estimated own price elasticities indicate that increased government taxation is an effective tool for curtailing the consumption of spirits (at the expense of lower government tax revenue), but it is less effective for curtailing the consumption of wine or beer. The cross-price elasticity estimates reveal that taxing beer or spirits may not be an effective tool for encouraging consumption switch from these alcoholic beverages to wine in light of wine’s greater health benefits. Income emerges as an important determinant of the consumption of both wine and spirits but not of beer, whereas unemployment emerges as an important determinant of the consumption of beer but not of wine or spirits. With respect to unemployment, we find no support for the addiction hypothesis in the case of wine and spirits and strong support for the severe budget constraint hypothesis in the case of beer.     

控股股东股权质押、控制权转移风险与广告投入

股权质押使控股股东面临控制权转移风险,其有动机进行市值管理。本文以2011-2019年中国A股上市公司为样本,考察股权质押情境下控股股东是否存在调整广告投入的行为。研究结果发现,控股股东进行股权质押后,公司广告投入水平显著提高,说明股权质押情境下控股股东会通过策略性地增加广告投入进行信息管理,而非通过削减广告投入进行向上盈余管理,证实广告具有短期股票回报效应;控制权转移风险较大时,控股股东股权质押对广告投入的正向影响更明显,说明股权质押情境下控股股东增加广告投入是出于缓解控制权转移风险的动机。进一步研究发现,在散户规模较大和产品直接与消费者接触的企业,广告更容易吸引投资者注意力,此时控股股东增加广告投入的动机更强,该行为短期内可以提振股价,但没有起到改善经营业绩的作用且加剧了股价波动。本文为资本市场和产品市场的联系提供了证据,且对相关部门加强上市公司广告费用监管具有一定的政策参考价值。     

广告支出与消费增长:基于1981年～2009年时间序列数据的经验研究

理论分析显示广告支出与消费增长相互依存,广告可以通过诱导消费者的潜在需求从而刺激消费,消费增长也会促使企业增加广告支出。笔者在多变量VAR模型的基础上,采用中国1981年～2009年度数据,运用协整检验发现:广告支出、城市居民消费支出和农村居民消费支出之间存在某种长期均衡关系,广告支出是城市和农村消费增长的格兰杰原因。脉冲响应和方差分解表明,广告对消费的刺激效应不断下降,呈现出长期均衡的趋势。从宏观整体的视角来看,企业广告长期投放应保持理性,广告支出应维持在相对稳定合理的状态。