Promotion and Fast Food Demand

Many believe that fast food promotion is a significant cause of the obesity epidemic in North America. Industry members argue that promotion only reallocates brand shares and does not increase overall demand. We study the effect of fast food promotion on market share and total demand by estimating a discrete / continuous model of fast food restaurant choice and food expenditure that explicitly accounts for both spatial and temporal determinants of demand. Estimates are obtained using a unique panel of Canadian fast food consumers. The results show that promotion primarily increases demand and has a smaller effect on restaurant market shares.