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Advertising Traded Goods

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  • Kinnucan, Henry W.

Abstract

Nerlove and Waugh's theory of cooperative (generic) advertising is extended to the case of traded goods. Results suggest that trade reduces the incentive to promote by enlarging the effective supply or demand elasticity facing the industry. This is especially true in the net exporter situation where the enlarged demand elasticity (relative to the autarky case) limits the ability to shift advertising costs onto consumers. Simulations of the model using data and parameter values for the California egg industry suggest that ignoring trade prejudices benefit-cost ratios in favor of the promotion program. The upward bias, moreover, is significant even when the trade share is modest.

Suggested Citation

  • Kinnucan, Henry W., 1999. "Advertising Traded Goods," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 24(1), pages 1-19, July.
    • Handle: RePEc:ags:jlaare:30872
    DOI: 10.22004/ag.econ.30872
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    1. 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.
    2. Todd M. Schmit & J. Carlos Reberte & Harry M. Kaiser, 1997. "An economic analysis of generic egg advertising in California, 1985-1995," Agribusiness, John Wiley & Sons, Ltd., vol. 13(4), pages 365-373.
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    4. Kinnucan, Henry W., 1997. "Middlemen behaviour and generic advertising rents in competitive interrelated industries," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 41(2), pages 1-17.
    5. Marc Nerlove & Frederick V. Waugh, 1961. "Advertising without Supply Control: Some Implications of a Study of the Advertising of Oranges," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 43(4_Part_I), pages 813-837.
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    9. Roley R. Piggott & Nicholas E. Piggott & Vic E. Wright, 1995. "Approximating Farm-Level Returns to Incremental Advertising Expenditure: Methods and an Application to the Australian Meat Industry," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 77(3), pages 497-511.
    10. Michael K. Wohlgenant, 1989. "Demand for Farm Output in a Complete System of Demand Functions," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 71(2), pages 241-252.
    11. Kinnucan, Henry W. & Christian, Jason E., 1997. "A Method For Measuring Returns To Nonprice Export Promotion With Application To Almonds," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 22(1), pages 1-13, July.
    12. Ferrero, Jennifer L. & Boon, Leen & Kaiser, Harry M. & Forker, Olan D., 1996. "Annotated Bibliography of Generic Commodity Promotion Research," Research Bulletins 122819, Cornell University, Department of Applied Economics and Management.
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    Cited by:

    1. Kinnucan, Henry W. & Myrland, Oystein, 2002. "Relationship Between Partial and Total Responses to Advertising with Application to U.S. Meats," Research Bulletins 122634, Cornell University, Department of Applied Economics and Management.
    2. Henry W. Kinnucan & Yuqing Zheng, 2004. "Advertising's effect on the market demand elasticity: A note," Agribusiness, John Wiley & Sons, Ltd., vol. 20(2), pages 181-188.
    3. Cranfield, John A.L., 2002. "Optimal Advertising With Traded Raw And Final Goods: The Case Of Variable Proportions Technology," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 27(1), pages 1-18, July.
    4. Richards, Timothy J. & Padilla, Luis, 2001. "Commodity R&D, Patenting, And Promotion," 2001 Annual meeting, August 5-8, Chicago, IL 20497, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    5. Richards, Timothy J. & Patterson, Paul M., 2000. "New Varieties And The Returns To Commodity Promotion: The Case Of Fuji Apples," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 29(1), pages 1-14, April.
    6. J. A. L. Cranfield, 2003. "Optimal Collective Investment in Generic Advertising, Export Market Promotion and Cost-of-Production-Reducing Research," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 51(3), pages 299-321, November.
    7. Freebairn, John W. & Goddard, Ellen W. & Griffith, Garry R., 2005. "When Can a Generic Advertising Program Increase Farmer Returns?," Australasian Agribusiness Review, University of Melbourne, Department of Agriculture and Food Systems, vol. 13.
    8. Harry M. Kaiser & Donald J. Liu & Ted Consignado, 2003. "An economic analysis of California raisin export promotion," Agribusiness, John Wiley & Sons, Ltd., vol. 19(2), pages 189-201.
    9. Freebairn, John W. & Alston, Julian M., 2001. "Generic advertising without supply control: implications of funding mechanisms for advertising intensities in competitive industries," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 45(1), pages 1-29.

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