Advertising and the aggregate demand for cigarettes

Listed in:

• Analysis of aggregate data
• Tax and price in HICs
• Impact of tax on tobacco use
• Theoretical frameworks
• Aggregate demand for tobacco products

Abstract

The study specifies a model which explains aggregate demand for cigarettes in terms of price, income and advertising. Publicity about the health effects of smoking is treated as a form of ‘anti-advertising’. A distinctive feature is that an attempt is made to measure advertising in terms of ‘messages’ rather than using the more common, but theoretically inappropriate, expenditure measure. The model is tested against quarterly U.K. data for the period 1957 II to 1968 IV, using ordinary least squares (OLS) regression. The results suggest that advertising had a positive, statistically significant impact on sales, and that this impact was only partly offset by the amount of publicity given to the health effects of smoking.