Promotion And Fast Food Demand: Where’s The Beef? Essay

12802 WordsJan 4, 201252 Pages
CONSUMER AND MARKET DEMAND AGRICULTURAL POLICY RESEARCH NETWORK Promotion and Fast Food Demand: Where’s the Beef? Timothy J. Richards and Luis Padilla Morrison School of Management and Agribusiness Arizona State University Research Project Number CMD-07-03 PROJECT REPORT May 2007 Department of Rural Economy Faculty of Agriculture & Forestry, and Home Economics University of Alberta Edmonton, Canada Promotion and Fast Food Demand: Where’s the Beef? Timothy J. Richards and Luis Padilla Morrison School of Management and Agribusiness Arizona State University Acknowledgements: Agriculture and Agri-Food Canada Consumer and Market Demand Agriculture Policy Research Network. Promotion and Fast Food Demand: Where’s the Beef? Many believe that fast food promotion is a significant cause of the obesity epidemic in North America. Industry members argue that promotion only reallocates brand shares and does not increase overall demand. This study weighs into the debate by specifying and estimating a discrete/continuous model of fast food restaurant choice and food expenditure that explicitly accounts for both spatial and temporal determinants of demand. Estimates are obtained using a unique panel of Canadian fast food consumers. The results show that promotion primarily increases demand and has very little effect on restaurant market shares. JEL Classification: C25, D12, I18, L66, M31 Keywords: consumer demand, discrete choice, fast food, pricing strategy, promotion, spatial modeling Introduction Claims that promotion strategies by fast food companies are at least partly responsible for rising obesity rates are now common (Kuchler, et al, 2005). Although the linkage between fast food consumption and the "obesity epidemic" is far from clear, if such claims are true then the implications for the industry could be far-reaching and pervasive. 1 In a

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