Optimal Producer Investment in Generic Advertising: The Case of Fluid Milk in Ontario and Quebec

The fluid milk sectors in Ontario and Quebec operate under myriad restrictions reflecting the supply management system in place. Active advertising campaigns for fluid milk are undertaken by producer organizations in each province. In Ontario, the provincial government contributes to the provincial advertising campaign. To investigate the implications of the advertising programs, econometric models of the Ontario and Quebec milk sectors are specified, estimated and simulated. Given the measured responses to advertising, optimal advertising expenditure rules are applied to the Ontario and Quebec milk sectors to evaluate the implications of moving from actual to optimal advertising expenditure for producer welfare. Les secteurs du lait de consommation de l'Ontario et du Québec fonctionnent sous une myriade de restrictions attachees au système actuel de gestion de l'offre. Des campagnes de publicité vigoureuses pour la consommation du lait sont entreprises dans chaque province par les organisations de producteurs et en Ontario le gouvernement provincial donne son appui financier à la campagne de publicité provinciate. Pour scruter les implications des programmes de promotion, les auteurs ont construit, évalué et appliqué en simulation des modèles économiques du secteur du lait de consommation des deux provinces. À la lumière des réactions mesurées à l'égard de la publicité, des règies de dépenses de publicité optimales sont appliquées aux deux secteurs, afin d'évaluer ce que le passage du niveau de promotion actuel à un niveau optimal signifierait pour la situation économique des producteurs.     

Optimal Institutional Mechanisms for Funding Generic Advertising: An Experimental Analysis

Given the uncertain legal status of generic advertising programs for agricultural commodities, alternative voluntary funding institutions are investigated that could provide a high level of benefits to producers. This experimental study simulates key economic and psychological factors that affect voluntary producer contributions to generic advertising. The results suggest that producer referenda play a critical role in increasing contributions and that producer surplus is maximized by a provision point mechanism instituted by producer referendum with thresholds ranging from 68% to 90%, and expected funding from 47% to 77% of the time, depending on the level of advertising effectiveness.     

Optimal Generic Advertising Decisions in Supply-managed Industries: Clarification and Some Further Results

Supply control enhances the incentive to promote through its ancillary trade policies that protect the domestic industry from foreign competition. Incentives are intensified when supply control is coupled with a price discrimination scheme that renders the supply of the agricultural product to the higher-priced (premium) market perfectly elastic. In this case, aper-unit levy imposed on the premium market to finance the advertising is shifted entirely to consumers, which means that the producer cost of advertising the premium product is nil. This in essence is the situation for fluid milk in Canada, Taiwan and California, which explains in part why fluid milk dominates the generic advertising scene in these regions. This article investigates these and related issues in some detail, using an earlier analysis by Goddard and McCutcheon as the point of departure. La gestion de l'offre amplifie les incitations à produire par le biais de ses politiques corrollaires de commerce extérieur qui mettent le secteur intérieur à I'abri de la concurrence étrangère. Les incitations sont defait intensifiées lorsque le contrôle de I'offre est coupléà un systéme de discrimination des prix qui rend I'offre d'unproduit agricole donné sur le marché les plus lucratifs parfaitement élastique. Dans ce cos, le droit unitaire imposé au marché le plus rentable pourfinancer la publicité est refilé entiérement aux consommateurs, de sorte que le coût à la production de la promotion duproduit vedette est nul. C'est essentiellement la situation qui prévaut pour le lait de consommation au Canada, à Taïwan et en Californie, ce qui en partie explique la prédominance de ce produit dans la publicité générique dans ces régions. Nous examinons ces questions plus ou moins en détail utilisant comme point de départ une analyse antérieure faite par Goddard et McCutcheon.     

Implications of Realization Uncertainty on Random Utility Models: The Case of Lottery Rationed Hunting

Conditional multinomial logit (MNL) models are often used to estimate the value of nonmarket resources under the assumption that consumer choices will be realized with certainty. The conditional MNL may not be appropriate when choices made may not be realized with certainty, such as when rationing mechanisms are used as a means of managing nonmarket resources. Two models that address this issue, developed by Boxall (1995) and Rouwendal (1989), are compared here to estimate welfare measures for moose hunting in Newfoundland. The results from these two models differ significantly from the results of a simple conditional MNL model .
Les modèles logit multinomiaux conditionnels (MNL) sont souvent utiliés pour calculer la valeur de ressources non marchandes, dans une hypothèse de départ voulant que les choir du consommateur sont assurés d'être réalisés. Ce genre de modèle peut toutefois ne pas convenir lorsque les choix fait ne sont pas assurés d'être pleinement réalisés, comme dans les cas où des mécanismes de rationnement sont imposés comme moyen de gérer ces ressources non marchandes. Nous comparons deux modèles conçus et mis au point, l'un par Boxall (1995), l'autre par Rouwendal (1989), pour estimer les mesures des effets socio-économiques d'une réglementation de la chasse de l'orignal a Terre-Neuve. Il apparaêt que ces deux modèles aboutissent à des résultats significativement différents de ceux obtenus par un modèle MNL conditionnet simple .     

Television Advertising and Beef Demand: Bayesian Inference in a Random Effects Tobit Model

A number of recent empirical studies have generated skepticism about the effectiveness of generic advertising for beef. One of these studies, Jensen and Schroeter (1992), examines data collected from a panel of households in a carefully designed experimental test of television advertising. The present paper undertakes a reexamination of the Jensen and Schroeter data with two significant improvements in method. First, the analysis disaggregates beef purchases into three product types (ground beef steaks and roasts) and assesses advertising's impact on the demand for each type separately. Second, the present analysis uses an improved econometric method: Bayesian inference in a random effects Tobit model. Inference is based on simulations of a posterior distribution using Gibbs sampling and data augmentation. As far as advertising's effects are concerned, the results of this analysis reaffirm the Jensen and Schroeter finding: The experimental television advertising campaign was not effective in increasing household purchases of beef. Plusieurs études empiriques récentes ont soulevé le doute quant à l'efficacité de la publicité générique sur le b?uf. Celle de Jensen et Schroeder (JS), notamment, portait sur les données recueillies auprès d'un groupe de ménages dans le cadre d'une expérience bien conçue sur la publicitéà la télévision. Les auteurs réexaminent les données de cette étude en apportant deux améliorations majeures à la méthode utilisée. En premier lieu, leur analyse désagrège les achats de b?uf en trois (viande hachée, biftecks et rôtis) et évalue l'impact de la publicité sur la demande de chaque produit. Deuxièmement, l'analyse repose sur une meilleure méthode économétrique, à savoir l'inférence bayésienne dans un modèle Tobit à effets aléatoires. L'inférence s'appuie sur la simulation d'une distribution postérieure par échantillonnage de Gibb et enrichissement des données. En ce qui concerne l'incidence de la publicité, cette nouvelle analyse confirme les constatations de l'etude JS, soit que la campagne expérimental de publicitéà la télévision n'entraîne pas une hausse des achats de b?uf par les ménages.     

Testing the Competitiveness of a Multistage Food Marketing System: The Canadian Chicken Industry

This paper develops a model for testing competitive behavior in multistage food marketing systems and applies this model to the Canadian chicken industry for the period 1965–66 to 1995–96. The empirical results suggest that the departure from competition in the chicken retailing and processing sectors is statistically significant over the entire time period and for the period in which supply management has operated. However, the rejection of perfect competitive does not enable us to identify in which sector the market power lies. The results of this paper provide support for the view that higher retail prices in Canada are not entirely due to the restriction of supply at the farm level by marketing boards. The presence of market power at either (or both) the processing or retailing level is also likely to result in higher retail prices. Un modèle pour tester le comportement concurrentiel dans les systèmes de commercialisation multipaliers des aliments est appliqué au secteur canadien du poulet sur la période 1965–1966 à 1995–1996. Les résultats empiriques révélent l'existence d'un écart significatif par rapport à l'état de concurrence parfaite dans les secteurs de la vente au détail et de la transformation du poulet sur toute la période d'examen, ainsi que pour celle au cours de laquelle le régime de gestion de I'offre a été en vigueur. Cet écart ne permet toutefois pas de mettre le doigt sur le secteur qui a un pouvoir sur le marché. Notre observation conforte l'opinion voulant que les prix au détail plus élevés enregistrés au Canada ne sont pas entiérement dus à la restriction par les offices de commercialisation de I'offre au niveau de la production. Ils peuvent également être le resultat de l'existence d'influences sur le marché au niveau de la transformation, de la vente au détail ou des deux à la fois.     

Offsetting Price Impacts from Imports with Generic Advertising and Promotion Programs: The Hass Avocado Promotion and Research Order

California avocado producers, concerned about sharp increases in imports from Chile and Mexico, secured passage of national legislation to include financial participation by imports in U.S. generic promotion programs. Estimated demand parameters for avocados indicate that new advertising and promotion funded by the 2.5 cents per pound assessment on all Hass avocados sold in the U.S. can offset a portion of the price impact of increased imports. Producers of other specialty crops may want to investigate the feasibility of using national promotion and research orders to expand demand when faced with increased production or imports.     

The Canadian Beef and Pork Sectors: New Found Relevance of Live Market Information

The structure of price transmission both vertically (between links in the market channel) and horizontally (between market areas) for beef and pork in Canada is examined. The analysis of vertical price transmission indicates that farmgate prices lead retail prices. The hypothesized relationship between retail and farmgate prices is that the farmgate demand curve is shifted by wholesaler anticipation of the retail price changes. Such a situation would place greater importance on the live markets since prices determined in these markets would eventually be reflected in the retail market. The results have further implications for the determination of price margins and related policy issues.     

The Generic Advertising Controversy: How Did We Get Here and Where Are We Going?

Since the 1980s, generic advertising programs for dozens of farm commodities have been entangled in a great deal of litigation. The author looks at the history of generic advertising policies, discusses why the litigation arose when it did, and argues that the current round of litigation is simply an inevitable outgrowth of fairly recent Supreme Court rulings on commercial speech. The author further examines some of the economic studies that have been performed. The author predicts an increase in generic advertising litigation based upon the degree of collectivization in an industry and urges economists to bring the controversy into their modeling.     

The Problem of Free Riding in Voluntary Generic Advertising: Parallelism and Possible Solutions from the Lab

Producers of many commodities pay for generic advertising, which is a public good for producers and, in cases like healthy foods, enhances social welfare. Though most programs were initially funded through the Voluntary Contribution Mechanism, many became mandatory to mitigate free riding. This experimental research simulates key economic and psychological details of these programs and produces donation results strikingly similar to a historic example. Because mandatory programs may be declared unconstitutional, the Provision Point Mechanism is tested as an alternative. This research also shows that refund-by-request donation mechanisms establish a status quo of contributing and reduce free riding.     

Voluntary Funding for Generic Advertising Using a Provision Point Mechanism: An Experimental Analysis of Option Assurance

The mandatory nature of check-off programs remains a contentious policy issue. A provision point mechanism with a money-back guarantee offers an attractive, alternative voluntary funding approach, yet faces the problem of how to maintain future administrative capacity should contributions fall short of the funding threshold in the present period. To address this concern, a novel two-threshold, provision point mechanism is tested that sets a high threshold to fund marketing and a low threshold, if necessary, to secure administrative capacity for future advertising. Experimental results demonstrate that providing such "option assurance" sustains high overall contributions and, in some settings, can increase producer surplus.     

Advertising Evaluation and Measurement Error: The Case of Fluid Milk in Ontario

A key component of any attempt to assess the economic impacts of advertising is the ability to obtain accurate estimates of advertising elasticities or response coefficients. Accurate estimates of advertising response require accurate data. This study compares estimates of advertising elasticities based on two alternative data series. One data series represents actual expenditures on fluid milk advertising as measured by the entity conducting the advertising. The other data series represents estimated advertising expenditures as measured by a commercial tracking firm. Results based on a quarterly econometric model covering the period 1973-84 suggest data obtained from the tracking service produce severely downward-biased estimates of advertising response. The tracking data, moreover, tended to understate the actual level of advertising over the sample period and to misrepresent turning points. Un des facteurs déterminants permettant d'évaluer l'incidence économique de la publicité est la capacityé d'obtenir une estimation précise des élasticités de la publicité ou des coefficients de réaction. Pour estimer avec précision la réponse à la publicité, on a besoin de données précises également. La présente étude compare les estimations de l'élasticite de la publicité obtenues au moyen de deux séries de données. La premiére série portait sur les dépenses réelles de publicité pour le lait de consommation, telles que calculées par l'organisme chargé de la campagne. La seconde représentait les dépenses de publicité prévues par une entreprise d'étude de marché. Les résultats tirés de l'application du modéie économétrique trimestriel à la période de 1973 à 1984 indiquent que les données de l'en-treprise d'étude du marché entraînent une nette sous-estimation de la réaction a la publicité. EHes ont eu aussi tendance à sous-estimer le budget réel consacré à la publicité au cours de la période à l'étude et à mal signaler les points déterminants du cycle.     

State Trading Enterprises in a Differentiated Product Environment: The Case of Global Malting Barley Markets

This study tested if the exclusive procuring and pricing policies of two state trading enterprises (STEs) in international malting barley markets could be used in a strategic trade context. The research provided four key findings. First, the global malting barley market operated in a quantity-setting oligopolistic structure during the study years. Second, both STEs and other exporting countries were in Cournot competition and thus made available strategic trade possibilities. Third, initial commodity payments were too high to generate a rent-shifting outcome. Fourth, product differentiation was confirmed, which may have dampened the desire/ability of STEs to pursue a rent-shifting objective.     

The Impact of Generic Advertising on U.S. Household Cheese Purchases: A Censored Autocorrelated Regression Approach

The impacts of generic cheese advertising on U.S. household cheese purchases are examined via the use of a unique household panel. Modest gains in overall at-home cheese purchases from generic cheese advertising appear to be largely the result of strong gains in purchases of natural cheese rather than processed cheese. Results indicate that relatively larger gains in household cheese purchases from generic advertising may be realized by targeting infrequent purchasers to increase purchase frequencies, rather than by targeting households in general to increase their conditional purchase levels.     

The Rate of Return to Agricultural Research in a Small Country: The Case of Beef Cattle Research in Canada

The net economic benefits of Canadian federal beef cattle research programs were estimated using the economic surplus approach. The internal rate of return to research expenditure from 1968 to 1984 was found to be 63% at the margin, indicating substantia] underinvestment in technological change. Rates of return indicative of underinvestment were found even when an adjustment was made to research costs to reflect the marginal excess burden of taxation. Most of the benefits of beef cattle research conducted during this time period accrued to Canadian beef producers. Les bénéfices économiques nets des programmes de recherche fédéraux Canadiens sur le boeuf sont estimés en utilisant ?approche du surplus économique. Le taux interne de rendement des défenses de recherche effectuées de 1968 à 1984 est établi à 63%, indiquant un sous-investissement substantiel dans le changement technologique. Même en incluant la perte de bien-être due à ?imposition ?une taxe, ?étude montre un sous-investissement dans la recherche. La plupart des bénéfices de la recherche sur le boeuf effectuée durant cette période ont profité aux producteurs agricoles.     

Television Advertising and Beef Demand: An Econometric Analysis of "Split-Cable" Household Panel Scanner Data

The Beef Promotion and Research Act of 1985 led to significant increases in the generic promotion of beef in the United States. Widely familiar television advertising campaigns. distributed throlgh national television networks, have been among the most visible outgrowths of this vigorous promotional effort. This study reports the results of econometric analysis of fresh beef consumption data for households participating in a controlled, experimental investigation of the television advertising's effects on beef demand. While factors such as price, income and household demographics are shown to be significant determinants of fresh beef purchases, the advertising campaigns apparently did not increase, and may even have decreased, the panelists' demand for beef.
La Loi américaine sur la promotion et sur la recherche sur la viande bovine (1985) a entrainé un accroissement significatif de la promotion du boeuf aux États-Unis. Des campagnes télévisées de publicité très suivies, réparties sur les grands réseaux de télévision du pays, ont été I'un des aspects les plus visibles de ces vigoureux programmes de promotion. L'étude fait rapport sur les résultats d'une analyse économétrique de la consommation de boeuf frais chez les ménages participant à une enqueCte expérimentale, controClée, sur les effets de la publicité télévisée sur la demande de boeuf. Alors que des facteurs comme le prix, les revenus et la structure des ménages se réevèlent comme des déterminants importants des achats de viande de boeuf, les campagnes publicitaires ne semblent pas avoir accrula demande chez les foyers participants; ils l'auraient meCme dans certains cas diminuée.