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

26 Pages Posted: 18 May 2008 Last revised: 13 Mar 2009

See all articles by Yuqing Zheng

Yuqing Zheng

University of Kentucky - College of Agriculture - Department of Agricultural Economics

Harry M. Kaiser

Cornell University - School of Applied Economics and Management

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 (AAR). 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 response, demand system, negative asymmetry, nonalcoholic beverage demand, positive asymmetry, regime switching, smooth transition function

JEL Classification: Q11, M37, C32

Suggested Citation

Zheng, Yuqing and Kaiser, Harry M., Estimating Asymmetric Advertising Response: An Application to U.S. Nonalcoholic Beverage Demand. Journal of Agricultural and Applied Economics, 2008, Vol. 40, No. 3, pp. 837-849 , Available at SSRN: https://ssrn.com/abstract=1129602

Yuqing Zheng (Contact Author)

University of Kentucky - College of Agriculture - Department of Agricultural Economics ( email )

Lexington, KY 40546
United States

Harry M. Kaiser

Cornell University - School of Applied Economics and Management ( email )

248 Warren Hall
Ithaca, NY 14853
United States
607-255-1598 (Phone)
607-254-4335 (Fax)

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