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Abstract
With the rise in obesity levels across the nation, policy makers and public
interest groups are taking more interest in advertising of unhealthful foods. The Better
Business Bureau has formed the Children’s Food and Beverage Advertising Initiative
(CFBAI), which has recruited carbonated soft drink (CSD) manufactures to voluntarily
restrict their advertising directed at children less than 12 years of age. This research
explores the effects of the CFBAI on firm level advertising to children and adults using
nonlinear time series processes. Estimated ARCH processes are significant in all models
and capture varying pulse-advertising strategies by all major firms. We find that the
market leader does in fact reduce its advertising to both adults and children and the
second largest firm reduces advertising to adults. Advertising for the non-participating
firm, however, increased for adults following the ban. The results emphasize the potential
benefits and difficulty of coordinating cooperative behavior in this type of industry. It
appears that policy strategies of this nature may be more effective if directed at industries
as a whole and not at individual firms.