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Market Allocation Rules For Nonprice Promotion With Farm Programs: U.S. Cotton

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  • Ding, Lily
  • Kinnucan, Henry W.

Abstract

Rules are derived to indicate the optimal allocation of a fixed promotion budget between domestic and export markets when the commodity in question represents a significant portion of world trade and is protected in the domestic market by a deficiency-payment program. Optimal allocation decisions are governed by advertising elasticities in the domestic and export markets and the export market share. Promotion's ability to lower deficiency payments is inversely related to the absolute value of demand elasticities in the domestic and export markets and directly related to advertising elasticities and certain policy parameters. The empirical application suggests subsidies for nonprice export promotion may be efficiency increasing in a second-best sense. That is, the heightened subsidies associated with the Targeted Export Assistance program and the Market Promotion Program appear to have corrected allocative errors that favored domestic market promotion.

Suggested Citation

  • Ding, Lily & Kinnucan, Henry W., 1996. "Market Allocation Rules For Nonprice Promotion With Farm Programs: U.S. Cotton," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 21(2), pages 1-17, December.
    • Handle: RePEc:ags:jlaare:31019
    DOI: 10.22004/ag.econ.31019
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    Cited by:

    1. 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.
    2. Capps, Oral, Jr. & Williams, Gary W. & Dang, Trang, 2010. "Effects of Lamb Promotion on Lamb Demand and Imports," Reports 90492, Texas A&M University, Agribusiness, Food, and Consumer Economics Research Center.
    3. Craig Depken & David Kamerschen & Arthur Snow, 2002. "Generic Advertising of Intermediate Goods: Theory and Evidence on Free Riding," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 20(3), pages 205-220, May.
    4. Henry W. Kinnucan & Øystein Myrland, 2002. "The Relative Impact of the Norway‐EU Salmon Agreement: a Mid‐term Assessment," Journal of Agricultural Economics, Wiley Blackwell, vol. 53(2), pages 195-219, July.
    5. Capps, Oral, Jr. & Williams, Gary W., 2006. "The Economic Effectiveness of the Cotton Checkoff Program," Reports 90753, Texas A&M University, Agribusiness, Food, and Consumer Economics Research Center.
    6. Henry W. Kinnucan & Maria Thomas, 1997. "Optimal Media Allocation Decisions For Generic Advertisers," Journal of Agricultural Economics, Wiley Blackwell, vol. 48(1‐3), pages 425-441, January.

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