Do Agricultural Marketing Cooperatives Advertise Less Intensively Than Investor-Owned Food-Processing Firms?

A common belief is that agricultural marketing cooperatives advertise less than their investor-owned counterparts, holding other factors constant. This paper presents both a conceptual and an empirical analysis that questions this conventional wisdom. Our conceptual model analyzes a cooperative’s optimal advertising-to-sales (A/S) ratio under three alternative objective functions. In each instance, the optimal A/S ratio is characterized by the well-known Dorfman-Steiner condition that also characterizes optimal advertising for an investor-owned firm. The empirical analysis examines forty-nine processed food markets, each containing at least one cooperative. The results do no support the conventional wisdom that cooperatives advertise less, ceteris paribus. The appearance that cooperatives advertise less is due to their predominance in industries with low margins and little product differentiation, factors that are associated with low advertising intensity regardless of a firm’s organizational form.


Subject(s):
Issue Date:
2000
Publication Type:
Journal Article
PURL Identifier:
http://purl.umn.edu/46410
Published in:
Journal of Cooperatives, Volume 15
Page range:
31-46
Total Pages:
16




 Record created 2017-04-01, last modified 2017-08-25

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