Advertising, Structural Change, and U.S. Non-Alcoholic Drink Demand

The dominant pattern in U.S. non-alcoholic drink: consumption over the past 25 years has been a steady increase in per capita soft-drink: consumption, largely at the expense of coffee (and to a lesser extent) milk consumption. Our findings suggest that the major factor governing this pattern is structural change. Specifically, trend was found to be statistically significant in three of the four equations estimated in the Rotterdam system. Moreover, the estimated trend-related changes in per capita consumption (-1.0 percent per year for milk, 2. 1 percent for soft drinks, and 3.7 percent for coffee and tea) leave at most 28 percent ofthe observed quantity variation for 1990-1994 to be accounted for by changes in relative prices, income, and advertising. Advertising effects are statistically significant, but modest. The question ofwhether milk advertising is profitable when demand interrelationships are taken into account must await additional research.

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Working or Discussion Paper
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RB 98-2

 Record created 2017-04-01, last modified 2018-01-22

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