Empirically Testing for Dynamic Causality between Promotions and Sales Beer Promotions and Sales in England

Abstract

We devise a decision tool to help economic researchers select a causal detection method compatible with real-world dynamics of an economic system under investigation. We apply it to test for dynamic causality between promotions and sales of a case-study beer brand in England. We find evidence that promotions and sales data for the brand are generated by a nonlinear deterministic dynamic system. Under these circumstances, conventional Granger Causality detection methods impose unreasonable restrictions on real-world market dynamics, and thus must give way to recently formulated Cross Convergent Mapping (CCM) methods. Our application of CCM methods provides strong evidence that promotions and sales for the brand are bi-causal. Promotions have a long-term impact on sales, and sales have a long-term impact on promotion decisions.