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.     

Decomposing the Variation in Generic Advertising Response over Time

A time-varying parameter model of fluid milk and cheese demand reveals that changes in age composition, race composition, and food spending patterns away from home were most important to changes in generic advertising response over time. Advertising response elasticities indicate that generic advertising could be enhanced by targeting young children households for fluid milk, and Asian/Hispanic households for cheese. Results also indicate that shifting targeted advertising efforts to the away-from-home market may increase generic cheese advertising response.     

Advertising Expenditures and the Consumption of Alcoholic Beverages

The theory of consumer behavior is applied to the estimation of a demand svstem. Monthly data on alcoholic beverages (beer, wine, liquor, soft dhnks) from the province of Ontario in Canada are analyzed. Before estimating the linear approximate almost ideal demand system (LA/AIDS), unit root and cointegration tests are implemented. Budget shares, per capita advertising expenditures, real total expenditure, prices and per capita consumption are found to be non-stationary. The budget share, the advertising expenditures, the prices and the real total expenditure are cointegrated for each beverage. Own and cross-price elasticities, income elasticities and own and cross-advertising elasticities are calculated from the estimated or the demand system. Based on own-price elasticities and income elasticities, alcohol consumption is consistent with the law of demand and the products analyzed are normal goods. The estimation of income and advertising effects is important for analyzing the need for, and the effectiveness of, potential control policies. The advertising elasticities are small but statistically significant. This suggests that advertising may promote alcoholic beverage consumption. The estimated inelastic demands for beer and wine suggest that the primary purpose of high excise taxes levied by the Federal and Provincial governments is to raise government revenues and not to discourage consumption.     

Estimating Dynamic Relationships between Pork Advertising and Revenues

This study provides a long-run analysis of the impacts of brand and generic advertising on pork revenues. The existence of a feedback relationship between pork revenues and pork advertising is investigated. The results suggest that a short-run feedback relationship exists between total pork advertising and revenues, but not for revenues and generic pork advertising. Long-run analysis shows that revenues significantly affect both advertising measures. However, no evidence of feedback relationships was found in the long run. Results shed light on the nature of strategic responses by pork advertisers to changes in advertising by beef and poultry. Specifically, the results provide evidence that pork advertisers are accommodating to beef's changes, but respond competitively to poultry's.     

Generic Product Advertising, Spillovers, and Market Concentration

We examine the decision to advertise a homogenous good. We show that the likelihood of inefficiently low advertising rests heavily on how one models the mechanism by which advertising affects demand. Regardless of this mechanism, however, there is always a lower bound of concentration below which no advertising occurs even when welfare-enhancing. In such cases, mandatory programs will raise welfare if they induce entry, although producer surplus may decline. Our model also provides an explanation for the stylized fact that advertising intensity first rises and then falls as concentration increases.     

Generic Advertising; and the Structural Heterogeneity Hypothesis

This paper adduces and tests the hypothesis that generic advertising responses are dynamic, i.e., are subject to change over time due to changes in target audiences, managerial expertise, copy quality or other time-related factors. Specifically, the authors consider the structural heterogeneity hypothesis from the perspective of three alternative econometric models that permit random and systematic time-varying response: the Prescott-Cooley model, the return-to-normality model, and the stochastic-trend model. A distinguishing characteristic of the models is the presence or absence of heteroscedasticity. Based on pretests, which failed to detect heteroscedasticity, a modified version of the stochastic-trend model is selected for hypothesis testing. Results based on data of the first 15 years of the Ontario fluid milk campaign suggest advertising responses are dynamic. Estimated advertising elasticities decline more or less monotonically over this sample period, from a high of 0.020-o.031 in the initial 1973–74 theme period, to a low of 0.0004-0.009 in the final 1986–87 theme period. The apparent declining effectiveness of the Ontario fluid milk campaign is consistent with wearout theory, and suggests that program managers may want to reassess marketing strategies to identify possible ways to improve performance. Given the importance of advertising elasticities in normative decision models and the growing evidence of structural heterogeneity, models that permit parameters to change over time should provide an improved basis for program assessment and resource allocation.     

Quantity and quality effects of advertising: a demand system approach

Quantity and quality effects of advertising are investigated in this article. A censored demand system is estimated for fish, beef, pork, and other meats using Norwegian household data. In the demand model, generic fish advertising and meat advertising is introduced as demand shifters, and at the same time unit values are treated as endogenous. The unit values capture the quality of the commodities. Empirical findings show that advertising can have both quantity and quality effects on household demand.     

Advertising and food, drink and tobacco consumption in the United Kingdom: a dynamic demand system

This paper tests for the influence of advertising on the inter‐product distribution of consumer demand for non‐durable goods and services in the UK, 1963–1996. The long‐run demand for seven categories of non‐durable products is modelled through an advertising‐augmented version of the almost ideal demand system (AIDS), which is incorporated into an error‐correction model to allow for short‐run dynamic adjustments to long‐run equilibrium positions. Model estimates confirm that the restrictions of price homogeneity and symmetry appear to be consistent with the data, yield measures of the various types of demand elasticity that are in general plausible, confirm the strong influence of prices on the allocation of consumer expenditure, but find little evidence to support the hypothesis that advertising has the power to effect marked changes in the inter‐product pattern of consumer demand in the UK.     

Modeling the demand for alcoholic beverages and advertising specifications

In this paper, the demand for beer, wine, spirits and soft drinks in Ontario is modeled in two parts: an equation is specifiec to endogenize group expenditures and a demand system is set up to allocate budgeted group expenditures across types o beverages. Advertising is allowed to influence both the level of group expenditures and its allocation. Three popula advertising specifications are compared using theJ‐test and the likelihood dominance criterion. Even though all threi specifications fitted well according to standard criteria, the calculated expenditure, price and advertising elasticities wen sensitive to the manner with which advertising is specified. This clearly highlights the need to rely on a sound criterion t< identify a dominant specification. From the identified dominant specification, we found that advertising has very subtle effect on expenditures on alcoholic beverages (group and individual beverages). Thus, advertising is not effective in enlarginj markets and this suggests that firms (especially breweries) use advertising to compete in zero‐sum market share games. From i public policy perspective, our results are comforting but future research should investigate whether the neutral effect o advertising on aggregated expenditures hide substantial offsetting changes in the drinking habits of individuals.     

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.     

AN EMPIRICAL ANALYSIS OF THE RELATIONSHIP BETWEEN ADVERTISING AND SALES: A CASE STUDY OF THE LIQUID MILK MARKET

The conventional econometric treatment of the possible dynamic relationship between two variables such as sales and advertising involves ad hoc assumptions concerning causality and lag structure. This paper focuses attention on a technique which tries to detect an empirical relationship between the advertising and sales of liquid milk. Our conclusions suggest that, at least in the market examined, the effectiveness of advertising in increasing sales appears to be limited.     

Generic Advertising and Product Differentiation

This article considers whether generic advertising lowers the differentiation among competing brands of the same good. Analytical results show that if the benefits from generic advertising from increased demand are outweighed by the costs from lower product differentiation then high–quality producers will not benefit from generic promotion. Hypotheses are tested empirically under a conditional–logit approach using retail–market sales and advertising data for the U.S. prune industry. Results from this study provide evidence that generic advertising has a slight differential effect on the perceived qualities of different brands.     

Optimal Commodity Promotion when Downstream Markets are Imperfectly Competitive

We investigate the optimal collection and expenditure of funds for agricultural commodity promotion in markets where the processing and distribution sectors may exhibit oligopoly and/or oligopsony power. The conditions that characterize optimal advertising intensity under perfect competition for funds generated from either per-unit or lump-sum taxes do not, in general, hold when marketing is imperfectly competitive. Simulation analyses show that imperfect competition always reduces farmers' optimal advertising expenditure and that an imperfectly competitive marketing sector may capture half or more of the benefits from the funds that are expended.     

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 confirmed 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.     

Food scares, advertising, and the demand for meat cuts in Great Britain

Retail demand systems for 19 different cuts of meat for beef, lamb, pork, bacon and poultry in Great Britain are estimated from monthly time series of consumer expenditure from 1989-2000 using a two stage budget allocation process and an LA/AIDS specification. The unconditional expenditure, own and cross price elasticities are derived for the individual meat cuts. The impact of adverse publicity from meat scares, especially BSE, and of positive publicity through consumer promotion and advertising are incorporated into the modelling. Meat scares produced a reallocation of consumer spending from red to white meats during the 1990s. The impact of species-based advertising was shown to have complex spillover effects both within and between meat species, and the response of consumer demand to advertising was considerably less than to adverse publicity.     

Comparative Effectiveness of Executional Elements in TV Food Advertising on Recall and Persuasion

Abstract

Worldwide food advertising has certain common elements such as the role that executional elements play in affecting the success of commercials. This study will examine the impact of a variety of executional elements on both recall and persuasion for 15-second and 30-second television advertising. The data was collected by well known advertising agencies.     

Advertising,concentration and profitability in Greek food manufacturing industries

The conventional framework for cross-sectional studies of industrial organisation focuses on the hypothesised relations among structure, conduct and performance (SCP). This paper investigates these relationships for the food and beverage manufacturing industries in a European country, i.e., Greece. 3SLS method is used to estimate the parameters of the profitability, concentration and advertising model for a sample of 38 four-digit industries in 1994. The main results, which are in line with the relevant empirical work, show that profitability is determined by advertising, which, in turn, is affected by both profitability and concentration, while the latter is determined by economies of scale.     

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.     

Bargaining rationale for cooperative generic advertising*

The beggar-thy-neighbour aspect of commodity advertising means that benefits to one commodity from advertising come at the expense of other commodities. The effect can be mitigated by cooperation among groups as shown by Alston, Freebairn and James (AFJ). A drawback to AFJ's analysis is that some cooperative outcomes require side payments from one producer group to another. This paper offers a bargaining solution as an alternative to cooperation in the case where cooperative side payments would be needed. We show that while bargaining without side payments is not as effective as cooperation at reducing beggar-thy-neighbour effects, it is a welfare improving alternative to non-cooperation and is likely more practical in many situations.     

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.