ADVERTISING TRADED GOODS

Nerlove and WaughÂ’'s theory of cooperative (generic) advertising is extended to the case of traded goods. Results suggest that trade reduces the incentive to promote by enlarging the effective supply or demand elasticity facing the industry. This is especially true in the net exporter situation where the enlarged demand elasticity (relative to the autarky case) limits the ability to shift advertising costs onto consumers. Simulations of the model using data and parameter values for the California egg industry suggest that ignoring trade prejudices benefit-cost ratios in favor of the promotion program. The upward bias, moreover, is significant even when the trade share is modest.


Subject(s):
Issue Date:
1999-07
Publication Type:
Journal Article
PURL Identifier:
http://purl.umn.edu/30872
Published in:
Journal of Agricultural and Resource Economics, Volume 24, Number 1
Page range:
38-56
Total Pages:
19




 Record created 2017-04-01, last modified 2017-04-04

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