Advertising Expenditure and Aggregate Demand for Cigarettes in Australia

Abstract

At present there is virtually no empirical evidence on the effect of total advertising expenditure on the aggregate demand for cigarettes in Australia. Nevertheless, advertising has been banned on television and radio since 1976 and there is some suggestion of a total ban in the future. In this paper, we present results of the estimation of a demand model for cigarettes in Australia, using annual data from 1961–62 to 1982–83. We find no statistical evidence that aggregate advertising has any effect on aggregate cigarette demand, a result which is consistent with the view that advertising in the cigarette industry is used as a brand switching device.