The demand for beer in presence of past consumption and advertising in the Czech Republic

Abstract

The paper focuses on beer consumption in the Czech Republic, the country with the highest beer consumption per capita in the world. To understand the recent beer-consumption behaviour, we use the monthly data from a three year period, 2006–2008, to estimate both the 2SLS and the SUR model charting the demand for beer extended to the past consumption and advertising expenditure. The demand for beer in the Czech Republic reacts more strongly to the changes in price than it does to the investments in advertising. The results suggest two implications for the policy-makers. Consumption is as sensitive to the price of beer and its alternatives as it is to advertising, so taxes or restrictions on advertising can affect the consumption of beer, considering the long tradition of Czech consumers in drinking beer as the strong role of the past consumption demonstrates.