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The Significance and Insignificance of Demand Analysis in Evaluating Promotion Programs

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  • George C. Davis

Abstract

The estimated effects of promotion on demand are often small and insignificant. Yet, the estimated effects of promotion on industry profit are often positive and large. This puzzle is explained by demonstrating that (in)significance of promotion in a demand equation does not imply, and is not implied by, (in)significance of promotion in an industry profit equation. A Monte Carlo example is provided. The econometric modeling implications are discussed. The short-run marginal effect of a dollar of generic beef promotion on slaughter cattle industry profit is estimated to be about $9.84 with a standard error of 3.77 for 1997. Copyright 2005, Oxford University Press.

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  • George C. Davis, 2005. "The Significance and Insignificance of Demand Analysis in Evaluating Promotion Programs," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(3), pages 673-688.
    • Handle: RePEc:oup:ajagec:v:87:y:2005:i:3:p:673-688
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    File URL: http://hdl.handle.net/10.1111/j.1467-8276.2005.00755.x
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    Cited by:

    1. Leister, Amanda M. & Capps, Oral, Jr. & Rosson, C. Parr, III, 2010. "The Economic Effects of New-Product Beef Promotion in Guatemala," Journal of Food Distribution Research, Food Distribution Research Society, vol. 41(2), pages 1-11, July.
    2. Lee L. Schulz & John M. Crespi, 2012. "Presence of Check‐Off Programs and Industry Concentration in the Food Manufacturing Sector," Agribusiness, John Wiley & Sons, Ltd., vol. 28(2), pages 148-156, March.

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