Consumer Demand Patterns Research Articles

The effects of changes in household demographics and employment on consumer demand patterns

This study examines to what extent changes in consumer demand patterns over the last two decades in the Netherlands can be attributed to changes in household demographics, employment and total expenditures. The dominating changes in consumer demand are decreasing budget shares of food & beverages and clothing & footwear and increasing budget shares of housing and services. The changes in households’ composition – away from the traditional one-earner family with children – together with the increase in household total expenditures account for about one-third of the decrease in the budget share of food & beverages, half of the increase in the budget shares of services and only a minor part of the increase in housing. Once controlled for budget effects, the quadrupling of the proportion of employed women with young children accounts for about one-third of the increase in the budget shares of personal & health care – including childcare – and food away, holidays & entertainment.

Advertising and food, drink and tobacco consumption in the United Kingdom: a dynamic demand system

AbstractThis paper tests for the influence of advertising on the inter‐product distribution of consumer demand for non‐durable goods and services in the UK, 1963–1996. The long‐run demand for seven categories of non‐durable products is modelled through an advertising‐augmented version of the almost ideal demand system (AIDS), which is incorporated into an error‐correction model to allow for short‐run dynamic adjustments to long‐run equilibrium positions. Model estimates confirm that the restrictions of price homogeneity and symmetry appear to be consistent with the data, yield measures of the various types of demand elasticity that are in general plausible, confirm the strong influence of prices on the allocation of consumer expenditure, but find little evidence to support the hypothesis that advertising has the power to effect marked changes in the inter‐product pattern of consumer demand in the UK.

Advertising and food, drink and tobacco consumption in the United Kingdom: a dynamic demand system

This paper tests for the influence of advertising on the inter-product distribution of consumer demand for non-durable goods and services in the UK, 1963–1996. The long-run demand for seven categories of non-durable products is modelled through an advertising-augmented version of the almost ideal demand system (AIDS), which is incorporated into an error-correction model to allow for short-run dynamic adjustments to long-run equilibrium positions. Model estimates confirm that the restrictions of price homogeneity and symmetry appear to be consistent with the data, yield measures of the various types of demand elasticity that are in general plausible, confirm the strong influence of prices on the allocation of consumer expenditure, but find little evidence to support the hypothesis that advertising has the power to effect marked changes in the inter-product pattern of consumer demand in the UK.

Estimating consumer demands across the development spectrum: maximum likelihood estimates of an implicit direct additivity model

This paper characterizes consumer demand patterns across the development spectrum using elasticity estimates from a demand system possessing non-linear Engel effects. Demands for six broadly defined goods are then projected under the assumption that per capita expenditure growth rates differ across the development spectrum. Such projections illustrate the extent to which non-linear income effects generate more plausible demand responses. Estimated marginal budget shares for food decline in a logistical manner and range from about 0.5 for Ethiopia to less than 0.05 for the USA. Engel elasticities for food range from 0.95 for Ethiopia to less than 0.1 for the USA.

The analysis of consumer demand in Greece. Model selection and dynamic specification

The paper analyses the pattern of consumer demand in Greece exploring systematically the questions of the functional form of demand that best fits the data, the appropriate dynamic structure and the empirical validity of the constraints of demand theory. A general dynamic Almost Ideal demand model for four categories of consumer non-durables for the period 1958–1994 is estimated. The maintained specification rejects the static AI, its counterparts implied by the partial adjustment and autoregressive disturbances models and, upon applying a non-nested test, the Rotterdam specification. However, it cannot reject homogeneity and symmetry nor the hypothesis of structural stability.

Vertical Coordination in the Swine Industry: A Multi‐Country Study

Pork constitutes about 45 percent of the world's total meat consumption. Recent trends indicate that pork consumption is likely to increase in future as well. The international pork industry is undergoing a structural and organizational change as a result of changes in the method of pork production and processing technology. This paper identifies a variety of pressures that are leading to these changes. One of the most important factors is the change in consumer demand patterns. Consumers now demand more specific product characteristics. In case of pork, the specificity of the product includes color and texture of the meat, origin of the meat, labeling information pertaining to nutritional contents, drug and chemical residues, and production methods used. In order to meet all these specific demands and to further reduce production costs, various stages of pork production have started to coordinate in many countries. The extent of vertical coordination varies both within and among the countries. This paper identifies the types of linkages and the methods of transaction(s) used between various stages of pork production in Canada, the Netherlands and the U.S. The paper also identifies the upcoming pressures for change and illustrates the analytical framework developed to compare coordination mechanisms that exist between stages of pork production in the three countries. The paper concludes that industrialization, globalization, and changes in consumer demand and preferences are resulting into massive structural and operational changes in the international pork industry.

UK agriculture in the wider economy: The importance of net SAM linkage effects

The paper investigates the linkages between UK agriculture and the wider economy using a modified version of a SAM Leontief model. Through multiplier decomposition, the nature and significance of the 'net SAM linkage effects' of agriculture (effects excluded from an input-output analysis of the economy) are examined. The empirical results suggest that the net SAM linkage effects of the agricultural and food accounts are relatively small. However, they illustrate differences between agricultural commodities which derive from not only the structure of production, but also the distribution of factor incomes and the pattern of consumer demand in the economy. Further, the SAM linkage effects are found to be significant in determining the magnitude of benefits that leak from the farm sector to the wider economy. Copyright 1995 by Oxford University Press.

Public Policy and the Control of Agricultural Processing and Distribution: Discussion

I share Mueller's concern over the potential antisocial impact of concentrated economic power. And there is no denying that corporations have a great deal of control over the food system, and that if present trends continue this control will increase. Perhaps he is correct in asserting that one result has been antisocial behavior on the part of food corporations. The limited usefulness of industrial organization theory, however, provides rather weak support for general conclusions with respect to behavior or for public policy prescriptions. Either a restructuring of Mueller's model to include a broader selection of variables or a simple empirical survey of the food industry turns up many significant departures from the general results he has attempted to establish. Thus, while I certainly would not argue against the updating and enforcement of existing antitrust laws, I do not find in the current organization of the food industry a compelling reason for a wholesale overhaul of antitrust laws, much less a need to initiate a public debate over the role of huge corporations vis-a-vis democratic theory. The application of industrial organization theory to any industry situation is a slippery task. The building of models from the theory leaves much to the imagination of the researchers. As Mueller says, the theory admits the examination of any characteristic that has a significant influence over behavior. I would prefer that the theory require the examination of all significant characteristics plus some quantification of their relative significance. For instance, in the two examples, coffee and beer, heavy weight was given the financial resources of the firm and the size of promotional budgets in predicting marketing success. While those variables are undoubtedly important, one can wonder about their relative importance had the model also examined a broader grouping of variables, such as raw material prices, consumer demand patterns, management competence of competitive firms and existing competitive conditions. For both examples one could argue that the entry or expansion of a new large firm is more a threat to an existing, but not necessarily socially appropriate, competitive equilibrium than of long-run monopolization. In beer, the rise from eighth to second in an already concentrated industry may have a variety of explanations, only one of which is the size of the promotional budget of the successful firm. Further, there is no particular theoretical reason to believe that once one firm has achieved such success it necessarily precludes any other firm from doing the same thing. The process of selecting significant c aracteristics is symptomatic of a general problem with the theory. For example, even the term market is uncomfortably open to arbitrariness as it seems to allow definitions ranging from relative product prices, products, and consumers, to geographic area, and o use them interchangeably. Similarly, perfo mance can be and is defined and measured in economic, social, or political terms. Certainly if the performance in the food industry is defined as financial results (a frequently u ed measure in micro economics) the industry is no big deal. The evidence of monopoly profits, whose short-term existence even in a perfectly competitive model should not be a surprise to an economist, suggests less than desirable economic performance, although the attraction of such a potential apparently is not lost on firms moving into new markets or act vities. I am not aware of any quantitative m asure of political performance, but from my view of food corporations, I am not overly impressed with their success. The heavy reliance on concentration ratios, while admittedly a useful indicator, does make R. J. Herder is director of economic research for Central Soya Co., Fort Wayne, Indiana.