Generic advertising without supply control: implications of funding mechanisms for advertising intensities in competitive industries

Abstract

Producer pro¢t-maximising rules for generic commodity advertising programs and associated funding levies are derived. Lump-sum, per unit and ad valorem levies, and government subsidy funding arrangements are compared and contrasted. The initial single-product competitive market model is extended to incorporate international trade, government price policies, and multiple commodity interactions.

Optimal promotion expenditures for salmon: The importance of international price linkages

“…Since T| is a decreasing function of v|/, it follows immediately from (8) that incomplete price transmission increases optimal intensity. If funds are raised from an excise or per-unit tax, as is usually the case (see, e.g., Forker and Ward (1993) and the references cited therein), a portion of the tax is shifted to consumers, which increases the incentive to promote from the producer perspective (Chang & Kinnucan 1991; see also Freebairn & Alston 2001). This added incentive is reflected in the optimality conditions by the disappearance of the supply elasticity, as shown by Alston, Carman and Chalfant (1994) (see also .…”

“…A related issue is how best to allocate a limited budget across alternative markets. Traditionally, optimal budget size has been determined using the Dorfman-Steiner theorem (1954), or one of its variants (see, e.g., the review paper by Freebairn & Alston 2001). Although the Dorfman-Steiner theorem serves as a useful guide to the optimal budget when the commodity in question is non-traded, for traded goods the theorem can be misleading.…”

Optimal generic advertising in an imperfectly competitive food industry with variable proportions⋆

“…Although substantial research has been done to determine the effect of the funding mechanism, trade, export promotion subsidies and policy interventions on promotion incentives (see, e.g. Freebairn and Alston (2001) and the references cited therein), relatively little is known about imperfect competition's effect. The few studies that have been done are empirical in nature (Suzuki et al, 1994), focus on monopoly effects (Goddard and McCutcheon, 1993;Kinnucan and Thomas, 1997;Kinnucan, 1999), or assume that food industry technology is of a fixed proportions or Leontief type (Cranfield and Goddard, 1999;Zhang and Sexton, 2000).…”