Advertising and industry sales: An empirical study of the West German cigarette market

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 influence of advertising on primary demand for cigarettes is investigated. By employing annual, bimonthly, and monthly observations, the consequences of temporal aggregation can be studied. Independent of the level of temporal aggregation, advertising was found to have a statistically significant impact on industry sales, although the influence diminished over time. This contradicts the findings of a well-known study by Lambin (1976), which lends support to the assumption of reciprocal cancellation of brand advertising in saturated markets. With respect to the problem of temporal aggregation, the results confirm the empirical and theoretical findings of Clarke (1976), and Bass and Leone (1983).