The effects of advertising in an inverse demand system: Norwegian vegetables revisited

Rickertsen et al. (1995) found no significant positive effects of advertising on vegetable demand using the almost ideal demand (AID) system. Using SUR in a quantity-dependent system assumes that prices are predetermined. During the Norwegian growing season, strict import regulations have been applied and quantities are apparently predetermined. To investigate whether the AID or a corresponding inverse demand system is appropriate, the endogeneity of prices and quantities are tested. Advertising expenditures are included as shift variables in both systems. Quantities appear to be predetermined, while prices are endogenous and the inverse model is selected. No positive effects of advertising are found