Measuring and Testing Advertising-Induced Rotation in the Demand Curve

Advertising can rotate the demand curve if it changes the dispersion of consumersÂ’ 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.


Issue Date:
2007
Publication Type:
Conference Paper/ Presentation
PURL Identifier:
http://purl.umn.edu/9938
Total Pages:
35
Series Statement:
Selected Paper 172302




 Record created 2017-04-01, last modified 2017-08-23

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