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Middlemen behaviour and generic advertising rents in competitive interrelated industries

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  • Kinnucan, Henry W.

Abstract

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 confrmed 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.

Suggested Citation

  • Kinnucan, Henry W., 1997. "Middlemen behaviour and generic advertising rents in competitive interrelated industries," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 41(2), pages 1-17.
    • Handle: RePEc:ags:aareaj:118014
    DOI: 10.22004/ag.econ.118014
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    References listed on IDEAS

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    Cited by:

    1. Richards, Timothy J. & Patterson, Paul M., 2000. "New Varieties And The Returns To Commodity Promotion: The Case Of Fuji Apples," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 29(1), pages 1-14, April.
    2. Xiao, Hui & Kinnucan, Henry W. & Kaiser, Harry M., 1998. "Advertising, Structural Change, And U.S. Non-Alcoholic Beverage Demand," 1998 Annual meeting, August 2-5, Salt Lake City, UT 20885, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
    3. Kinnucan, Henry W., 2003. "Optimal generic advertising in an imperfectly competitive food industry with variable proportions," Agricultural Economics, Blackwell, vol. 29(2), pages 143-158, October.
    4. Henry W. Kinnucan & Øystein Myrland, 2002. "The Relative Impact of the Norway‐EU Salmon Agreement: a Mid‐term Assessment," Journal of Agricultural Economics, Wiley Blackwell, vol. 53(2), pages 195-219, July.
    5. Craig Depken & David Kamerschen & Arthur Snow, 2002. "Generic Advertising of Intermediate Goods: Theory and Evidence on Free Riding," Review of Industrial Organization, Springer;The Industrial Organization Society, vol. 20(3), pages 205-220, May.
    6. Kinnucan, Henry W., 1999. "Advertising Traded Goods," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 24(1), pages 1-19, July.
    7. Henry W. Kinnucan & Maria Thomas, 1997. "Optimal Media Allocation Decisions For Generic Advertisers," Journal of Agricultural Economics, Wiley Blackwell, vol. 48(1‐3), pages 425-441, January.
    8. Aust, Gerhard & Buscher, Udo, 2014. "Cooperative advertising models in supply chain management: A review," European Journal of Operational Research, Elsevier, vol. 234(1), pages 1-14.

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