Measuring the Effects of Generic Dairy Advertising in a Multi-Market Equilibrium |
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Authors: | Joseph V Balagtas Sounghun Kim |
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Institution: | Joseph V. Balagtas is assistant professor, Department of Agricultural Economics, Purdue University. Sounghun Kim is research associate, Agricultural Industry and Agribusiness Research Center, Korea Rural Economic Institute, Seoul, Korea. |
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Abstract: | 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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Keywords: | dairy equilibrium displacement model generic advertising spillover effects |
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