Advertising and alcoholic drink demand in the UK: some further Rotterdam model estimates

Martyn Duffy
University of Manchester Institute of Science and Technology, Manchester, UK


Duffy (1987, 1989) and Selvanathan (1989) have recently presented estimates of the influence of advertising on alcoholic drink demand in the UK. Although they worked with data spanning different periods, both of these authors' estimates were derived from very similar versions of the same model of consumer behaviour: the so-called 'Rotterdam' model as amended to incorporate advertising outlays amongst the explanatory variables or determinants of demand.

The model's curious name is derived from the original domicile of the two economists who developed this analysis: Barten (1967) and Theil (1967). In fact, the Rotterdam model is just one example of various types of 'system-wide' allocative demand models which have been developed by economists over recent decades. These are models which seek to explain and predict the level and composition of demand for a set of goods where the latter are indeed analysed as a group together (or 'system'), and not as individual, isolated products. Changes in the demand for one good (caused by movements in tastes, incomes, prices, advertising, etc.) affect the demand for at least one other good in the system, and probably more than one, if only because of the budget constraint which consumers face: if they wish to buy more of one good, then it is likely that they will have to retrench elsewhere.