Page 241 - The Handbook of Persuasion and Social Marketing

222 The Handbook of Persuasion and Social Marketing

intermediate value of e = 0.18. Selective demand allows for brand-switching
within product categories, so not surprisingly its elasticity estimates are
higher than for primary demand. Advertising elasticity estimates for aggre-
gate sales of alcoholic beverages range from e = 0.01 to e = 0.07, and for ciga-
rettes the values range from e = 0.01 to e = 0.10.
If advertising expenditures do influence demand, then advertising bans
should reduce product consumption. However, empirical investigations of
alcohol and cigarette advertising bans have produced inconsistent results
rather than empirical generalizations. Bans on alcohol advertising have
been argued to reduce (Saffer, 1991), increase (Young, 1993), and have no
impact on consumption (Nelson, 2010). Some research has shown that
complete bans on cigarette advertising do reduce consumption, though not
necessarily significantly (Capella, Taylor, & Webster, 2008). Saffer and
Chaloupka (2000) found mixed evidence for the effects of complete ciga-
rette advertising bans, but they concluded that a complete ban in all
Organisation for Economic Co-operation and Development (OECD) coun-
tries would have reduced consumption by 7.4%. A complete ban is a 100%
reduction, so the implied change in consumption for a 1% change in adver-
tising would be e = 0.074, comparable to other findings in Table 8.4.

Price Elasticities

Price elasticities for selective and category demand are shown in Table 8.5.
Two studies of selective demand showed that it is elastic, with e estimated
to be −1.76 in studies up to 1988 (Tellis, 1988) and e = −2.62 in studies
up to 2005 (Bijmolt, Van Heerde, & Pieters, 2005). Because consumers
can substitute one brand for another in response to price changes, these
higher values are logical. Two other kinds of elastic demand shown in the
table are charitable contributions, which respond to changes in tax de-
ductibility—essentially changing the cost of a donation—with e = −1.44
(Peloza & Steel, 2005), and passenger air travel, with e = −1.15 (Brons,
Pels, Nijkamp, & Rietveld, 2002). These results are also reasonable, be-
cause contributions and many kinds of air travel are discretionary expen-
ditures and can easily be changed in response to changes in costs.
Demand for other products in the table is inelastic, ranging from −0.25
to −0.85. The lowest value, −0.25, is for the effect of state and local taxes
on economic development (Bartik, 1992). To the extent that higher em-
ployment, business growth, and other forms of business activity affect
well-being, localities that raise taxes may reduce well-being, though Bartik
suggested that the benefits of lowering taxes might not be justified by the
costs. Other lower values in the table are for public transport demand,