Dynamic Sensitivity of Sales to Advertising: A Case of Peanut Butter Industry

Abstract

Brand and generic advertising is increasingly being used to promote food products. An important question is whether such generic and band advertising leads to increase in aggregate demand or simply brand substitution. Using error correction model, this note addresses the issue by estimating for long-run and short-run advertising sensitivity of demand for peanut butter. Results suggest that brand substitution may occur in the short-run and boost the aggregate demand in the long run.