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Beggar-Thy-Self Advertising: A Multi-Market Model of Generic Promotion for Dairy Products

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  • Balagtas, Joseph Valdes
  • Kim, Sounghun

Abstract

We develop a multi-market equilibrium displacement model that allows for demand linkages (substitutes or complements) across downstream product markets, and supply linkages through the common use of a raw commodity as the key input. Applying the model to the dairy sector, we find that the effectiveness of producer-funded advertising, and thus optimal advertising intensities, depends on the demand relationships across dairy product markets (cross-price and cross-advertising elasticities), as well as the re-allocation of raw milk towards the advertised market. We argue that the previous literature, which ignores the horizontal linkages highlighted here, tends to overstate the effectiveness of generic commodity promotion for dairy, and thus results in too much advertising.

Suggested Citation

  • Balagtas, Joseph Valdes & Kim, Sounghun, 2005. "Beggar-Thy-Self Advertising: A Multi-Market Model of Generic Promotion for Dairy Products," 2005 Annual meeting, July 24-27, Providence, RI 19303, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    • Handle: RePEc:ags:aaea05:19303
    DOI: 10.22004/ag.econ.19303
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    References listed on IDEAS

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    1. Donald J. Liu & Olan D. Forker, 1990. "Optimal Control of Generic Fluid Milk Advertising Expenditures," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 72(4), pages 1047-1055.
    2. H. W. Kinnucan, 1996. "A Note On Measuring Returns To Generic Advertising In Interrelated Markets," Journal of Agricultural Economics, Wiley Blackwell, vol. 47(1‐4), pages 261-267, January.
    3. Schmit, Todd M. & Kaiser, Harry M., 2002. "Measuring the Impacts of Generic Fluid Milk and Cheese Advertising: A Time-Varying Parameter Application," Research Bulletins 122635, Cornell University, Department of Applied Economics and Management.
    4. Schmit, Todd M. & Kaiser, Harry M., 2002. "Modeling The Effects Of Generic Advertising On The Demand For Fluid Milk And Cheese: A Time-Varying Parameter Application," 2002 Annual meeting, July 28-31, Long Beach, CA 19754, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
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    6. Kaiser, Harry M., 1997. "Impact Of National Generic Dairy Advertising On Dairy Markets, 1984-95," Journal of Agricultural and Applied Economics, Southern Agricultural Economics Association, vol. 29(2), pages 1-11, December.
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    8. Harry M. Kaiser & Todd M. Schmit, 2003. "Distributional effects of generic dairy advertising throughout the marketing channel," Agribusiness, John Wiley & Sons, Ltd., vol. 19(3), pages 289-300.
    9. Alston, Julian M. & Sumner, Daniel A. & Balagtas, Joseph Valdes & Brunke, Henrich, 2004. "Economic Implications Of The Australia-U.S. Free Trade Agreement For U.S. Dairy Markets And Domestic Dairy Farm Programs," 2004 Annual meeting, August 1-4, Denver, CO 20164, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
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