The long-run demand for alcoholic beverages and the advertising debate: A cointegration analysis

Coulson N. Edward, John R. Moran, Jon P. Nelson

Research output: Chapter in Book/Report/Conference proceedingChapter

14 Scopus citations

Abstract

Time-series models of the demand for alcoholic beverages have been criticized for use of annual data; omitted variables; mis-measurement of advertising; simultaneous equations bias; and inadequate attention to nonstationarity and dynamics. This paper reappraises the relationship between alcohol advertising, price, and consumption in a manner which speaks to these issues. Using quarterly data from 1970:1 to 1990:4 on three beverages (beer, wine, and distilled spirits), we find evidence of cointegration between beverage consumption, prices, advertising, and real income. Elasticities obtained from the estimated cointegrating vectors indicate that long-run beverage demands are both price and income inelastic. Moreover, after correcting for each of the problems described above, advertising has virtually no influence on the steady-state level of alcoholic beverage consumption.

Original languageEnglish (US)
Title of host publicationAdvertising and Differentiated Products
PublisherJAI Press
Pages31-54
Number of pages24
ISBN (Print)0762308230, 9780762308231
DOIs
StatePublished - Jan 1 2001

Publication series

NameAdvances in Applied Microeconomics
Volume10
ISSN (Print)0278-0984

All Science Journal Classification (ASJC) codes

  • Economics, Econometrics and Finance (miscellaneous)

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    N. Edward, C., Moran, J. R., & Nelson, J. P. (2001). The long-run demand for alcoholic beverages and the advertising debate: A cointegration analysis. In Advertising and Differentiated Products (pp. 31-54). (Advances in Applied Microeconomics; Vol. 10). JAI Press. https://doi.org/10.1016/s0278-0984(01)10003-9