Effects of advertising on U.S. non-alcoholic beverage demand: Evidence from a two-stage rotterdam model

Abstract

A two-stage Rotterdam model is estimated to determine the effects of advertising on the demand for non-alcoholic beverages in the United States. Results suggest that advertising has no effect on the demand for non-alcoholic beverages taken as a group. However, the hypothesis that advertising has no effect on the distribution of demand within the non-alcoholic beverage group is firmly rejected. Coffee and tea are most affected by other beverage advertising, and milk the least. Similarly, juice advertising exerts the largest influence within the beverage group, and milk advertising the least. Overall, however, the major determinants of the consumption pattern are relative prices and structural change.