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Estimating Asymmetric Advertising Response: An Application to U.S. Nonalcoholic Beverage Demand

Published online by Cambridge University Press:  26 January 2015

Yuqing Zheng  and
Harry M. Kaiser
Yuqing Zheng
Affiliation:
Department of Applied Economics and Management at Cornell University, Ithaca, NY
Harry M. Kaiser
Affiliation:
Department of Applied Economics and Management at Cornell University, Ithaca, NY
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Abstract

We propose a regime-switching model that allows demand to respond asymmetrically to upward and downward advertising changes. With the introduction of a smooth transition function, the model features smooth rather than abrupt parameter changes between regimes. We apply the model to nonalcoholic beverage data in the United States for 1974 through 2005 to investigate asymmetric advertising response. Results indicate that a decrease in milk advertising had a more profound impact on milk demand than an increase did. An increase in milk advertising had no impact on milk demand, but a decrease could have an own-advertising elasticity up to 0.049.

Keywords

asymmetric advertising responsedemand systemnegative asymmetrynonalcoholic beverage demandpositive asymmetryregime switchingsmooth transition functionC32M37Q11
Type
Research Article
Information
Journal of Agricultural and Applied Economics , Volume 40 , Issue 3 , December 2008 , pp. 837 - 849
Copyright
Copyright © Southern Agricultural Economics Association 2008

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