Measuring and Testing Advertising-Induced Rotation in the Demand Curve

Yuqing Zheng, Henry Kinnucan and Harry Kaiser

No 9938, 2007 Annual Meeting, July 29-August 1, 2007, Portland, Oregon from American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association)

Abstract: Advertising can rotate the demand curve if it changes the dispersion of consumers' valuations. We provide an elasticity form measure of the advertising-induced demand curve rotation in five demand models and test for its presence in the U.S. non-alcoholic beverage market. The AIDS model reveals that doubling advertising spending rotates the demand curves clockwise for milk, and coffee and tea with associated slope changes of 7.3% and 11.6%. Soft-drink advertising rotates its demand curve counterclockwise. Our policy suggestion is that milk and soft-drink firms might enhance profits by timing advertising to coincide with high- and low-price periods, respectively.

Keywords: Demand; and; Price; Analysis (search for similar items in EconPapers)
Pages: 35
Date: 2007
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea07:9938

DOI: 10.22004/ag.econ.9938

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