Measuring and Testing Advertising-Induced Rotation in the Demand Curve

address the first question by providing an elasticity form measure of the advertising-
induced demand curve rotation in five demand models and testing for its presence in
non-alcoholic beverages, thereafter we address the second question using Frisch’s
(1959) duality relation.

Despite a long-standing hypothesis that the advertising of farm products
alters own-price demand elasticities (Waugh 1959; Quilkey 1986), and the
importance of the hypothesis for allocation decisions (Chung and Kaiser 1999) and
producer returns (Zhang and Sexton 2002), there is little research to date that has
tested this hypothesis. The only known tests in the agricultural economics literature
are the studies of domestic cotton promotion by Ding and Kinnucan (1996) and of
fluid milk and cheese advertising by Schmit and Kaiser (2004) in which the
hypothesis of curve rotation was both rejected, and a study by Chung and Kaiser
(2000) in which advertising was found to make demand less elastic for New York
City fluid milk market.² Furthermore, in the marketing literature where the
hypothesis has received greater attention there is evidence that advertising can
indeed influence consumers’ sensitivity to price. In particular, Wittink (1977) found
that of 20 studies that addressed the issue 15 showed evidence of curve rotation,
with seven indicating a more elastic demand due to advertising and eight a less
elastic demand.

The purpose of this research is to address the direction, size, and marketing
implications of the advertising-induced rotation in the demand curve for non-
alcoholic beverages. Compared with alcoholic beverage or tobacco advertising
(Saffer and Dave 2002; Keeler et al. 2004), non-alcoholic beverage advertising

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