A Cointegration Analysis of Advertising and Sales Data

It is argued that the nature of the industry levelrelationship between advertising and sales can givesome indication of the form of competition in anindustry. Hence, this paper examines whether there isa long-run, stable, equilibrium relationship betweenadvertising and sales for food and soft drinksindustries. Results suggest that the variables arenon-stationary, but do not contain seasonal unitroots. Cointegration is not identified between softdrinks industry advertising and sales, which, togetherwith the results of differenced variable regressions,suggests that rivalry between firms in this industrymay be intense.