ADVERTISING TRADED GOODS

Nerlove and Waugh's theory of cooperative (generic) advertising is extended to include tax shifting, cost sharing, and trade. Comparative-static analysis indicates that trade reduces the incentive to promote in the domestic market, and this is true whether the industry inquestion is a net exporter or a net importer. The theory is applied to California egg advertising to demonstrate utility and to highlight the importance of including trade relationships in advertising benefit-cost studies.International Relations/Trade, Marketing,

FUTILITY OF TARGETED FISH TARIFFS AND AN ALTERNATIVE

Targeted tariffs are a common tool used by importing countries to protect domestic fish producers. Unfortunately, such tariffs, in general, are ineffectual. The reason is twofold. First, fish tend to be homogenous across supply sources, which means a tariff on one supply source acts as an implicit import subsidy to other supply sources. Second, source-specific import shares tend to be small, which means that the import demand elasticity is large, both absolutely and in relation to the import supply elasticity. As a consequence, most of the tariff is borne by foreign producers rather than domestic consumers. Indeed, analysis of a $0.50/lb. tariff on catfish imports from Vietnam indicates that the tariff would increase the US price by at most$0.17/lb. in the short run and $0.11/lb. in the long run. In light of this, and the potential for retaliation, a better policy option may be market promotion. To examine this, an expression is developed to indicate the optimal promotion levy. Applying the expression to catfish, results suggest that a levy of between 2% and 4% on imports would be optimal in the sense that the induced promotion expenditure would maximize foreign producer surplus. As a bonus, domestic producer surplus would increase in that spending levels more nearly match the economic optimum.Resource /Energy Economics and Policy,

PRICE BARGAINING WITHOUT SUPPLY CONTROL

Primary food producers are permitted to bargain as a group for higher prices. Supply response, however, is critical to the long-run success of producer cartels. This article presents a model that elucidates that role of supply response in agricultural price bargaining when no overt action is taken to limit quantity and participation in the cartel is voluntary. Free-riding, for example, is seen as having a dual nature: it undermines the cartel's influence at the negotiating table but it enhances the cartel's ability to sustain a negotiated price increase by attenuating supply response. That price bargaining can result in significant transfers from processors to producers when demand is inelastic and supply is uncontrolled is highlighted in the empirical application.Demand and Price Analysis,

Middlemen behaviour and generic advertising rents in competitive interrelated industries

This article focuses on the role of middlemen in determining the returns to generic advertising in a competitive industry where supply is uncontrolled, the price of marketing inputs is endogenous, and retail markets are interrelated through consumer preferences. Theoretical analysis suggests farm-gate returns (quasi-rents) are overstated when input substitution at middlemen level is ignored, a result confrmed in the empirical application. As for mark-up behaviour, represented by the farm-retail price transmission elasticity, a general result is that farm-gate returns to generic advertising always increase as the transmission elasticity decreases, provided retail demand is more elastic than input substitution. Endogenising the price of marketing inputs has little effect on advertising rents.Agribusiness, Marketing,

DEMOGRAPHIC VERSUS MEDIA ADVERTISING EFFECTS ON MILK DEMAND: THE CASE OF THE NEW YORK CITY MARKET

An advertising-sales response model is extended to include the effects of demographic factors (age and race) as additional determinants of milk demand. Previous research indicates that the age structure of a population and its racial composition are primary factors influencing fluid milk sales. Failure to incorporate these factors in the milk demand model results in a 30 percent downward biased estimate of the advertising effect. Consequently, the economic effectiveness of milk advertising is understated when the effects of demographic variables are ignored. Changes in demographic factors (growing nonwhite population and shrinking teenage market) appear to explain the relatively flat trend in per capita milk sales in the New York City market over the period 1971-80-a period in which dairy producers spent $12 million on generic advertising of milk. Net returns to Federal Order 2 dairy farmers from generic advertising of fluid milk is estimated to average$6.07 per media dollar invested over the 1972-79 period.Livestock Production/Industries, Marketing,

MARKET ALLOCATION RULES FOR NONPRICE PROMOTION WITH FARM PROGRAMS: U.S. COTTON

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. PromotionÂ’'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.Agricultural and Food Policy,

UPSTREAM EFFECTS OF GENERIC ADVERTISING: THE CASE OF CATFISH

Muth's model is adapted to determine the effects of generic advertising on upstream factor markets in a competitive industry where funds for promotion are raised through a feed tax. Optimality conditions indicate that a feed tax is an inferior funding mechanism. That is, the resulting promotion budget, in general, is too small to maximize producer surplus at the farm level. Applying the model to the U.S. catfish industry, results suggest that raising the feed tax from $5 to$6 per ton is welfare increasing for farm, feed, and non-feed sectors alike. Distributional analysis suggests that the processing sector captures most of the long-term benefits (51%), followed by the non-feed sector (42%). Despite the feed sector's modest share of total benefits (7%), owing to tax shifting its long-run benefit-cost ratio (1.8:1) is favorable. Because feed and non-feed inputs are gross substitutes, the feed tax generates a positive externality for non-feed suppliers. Accounting for this externality raises the non-feed sector's net benefit by 36%. Overall, about one-half of the program's long-term net benefits accrue to input suppliers.Resource /Energy Economics and Policy,

EFFECTS OF GENERIC ADVERTISING ON PERCEPTIONS AND BEHAVIOR: THE CASE OF CATFISH

An eight equation partially-recursive econometric model is specified to indicate the effects of catfish advertising on product awareness, beliefs, attitude and consumption. Results indicate that the ad campaign in its first year (i) increased consumer's awareness on farm-raised catfish 15 percent, (ii) improved consumers' perceptions of and attitude toward catfish 3 to 6 percent, and (iii) increased at-home and restaurant purchases of catfish 12 to 13 percent. The response to the ad campaign is broken down into an "attitude effect" and a "reminder effect" to determine the relative behavioral importance of the affective and cognitive components of the ad copy. Model simulations suggest primacy of the reminder effect, implying the factual content of the ads had less impact on behavior than the mere presence of the ads.Marketing,

Seasonality in Long-Run Advertising Elasticities for Fluid Milk: An Application of Smoothness Priors

A.E. Res. 81-

Effects of Antidumping Duties with Bertrand Competition: Some Evidence for Frozen Catfish Fillets

Antidumping duties are popular in the United States because under the Byrd Amendment domestic industry gets to keep tariff revenues. However, whether antidumping duties are an effective instrument of protection depends crucially on the tariff's ability to increase demand for the home good. Under Bertrand competition, the Byrd Amendment enhances tariff effects on the home price and trade flows in comparison to perfect competition. Assuming Bertrand competition and differentiated products, price-reaction functions of frozen catfish fillets are derived and estimated jointly with a demand equation using monthly data for the period January 1999 - December 2005. An inverse demand equation for farm-level products is also added to explore the efficacy of the tariff on price of farmed catfish. The estimated increase associated with the duty is exhibited tiny in price and sales of domestic fillets but insignificant in farm price. The result suggests antidumping duties are a weak tool for protecting the domestic catfish industry.antidumping tariff, Bertrand competition, Byrd Amendment, catfish, price, International Relations/Trade, Resource /Energy Economics and Policy,