Testing Advertising-Induced Rotation of Demand Curves in the EU Salmon Market

Abstract

The Almost Ideal Demand System (AIDS) is estimated to examine the responses for salmon promotion conducted by the Norwegian Seafood Council (NSC) in the EU Atlantic salmon market. The model allows advertising to shift and rotate the demand curve simultaneously. EU demand is segmented by supply sources of the salmon, namely Norway, the United Kingdom, Chile, Canada, and the Rest of World. Results suggest that a 10% increase in advertising expenditure sponsored by the NSC makes the demand curve of Norwegian salmon and Canadian salmon rotate counterclockwise by 0.54% and 10.3%, respectively, and the curve for the Rest-of-World salmon rotate clockwise by 4.09%. In our empirical case of salmon demand, the impact of advertising-induced rotation on the optimal spending level and the change in producer surplus is significant when the advertising expenditure is greatly intensified, the export volume is huge and the supply is less elastic.