U.S. Non-alcoholic Beverage Demand: Evidence from AIDS Model with Dynamic Effect

Abstract

This study estimates the degree of habit formation and demand for the U.S. non-alcoholic beverage market by incorporating a dynamic effect in five different beverages. This study employs a linear-approximate almost ideal demand system (LA-AIDS) to model demand for five non-alcoholic beverages from 1974 through 2014. The results show that current consumption of all non-alcohol beverages is positively related to previous consumption by controlling price and expenditure. This study mainly finds that bottled water is the most habitual product of the non-alcoholic beverage group.