Journal
AMERICAN JOURNAL OF AGRICULTURAL ECONOMICS
Volume 89, Issue 4, Pages 932-946Publisher
BLACKWELL PUBLISHING
DOI: 10.1111/j.1467-8276.2007.01037.x
Keywords
dairy; equilibrium displacement model; generic advertising; spillover effects
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We develop a multi-market equilibrium displacement model that allows demand linkages 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 depends on the demand relationships across dairy product markets (cross-price and cross-advertising elasticities) as well as the reallocation of milk toward the advertised market. We show 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.
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