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Distribution of gains from research and promotion in the presence of market power

Author

Listed:
  • Michael K. Wohlgenant

    (North Carolina State University, Department of Agricultural and, Resource Economics, Box 8109, Raleigh, North Carolina 27695., E-mail: michael_wohlgenant@ncsu.edu)

  • Nicholas E. Piggott

    (North Carolina State University, Department of Agricultural and, Resource Economics, Box 8109, Raleigh, North Carolina 27695., E-mail: nick_piggott@ncsu.edu)

Abstract

This article evaluates how marginal returns to producers from promotion and research are affected when market intermediaries have market power in the retail market. Using an equilibrium displacement model, the relative importance of market power is evaluated for a “typical” food-processing industry, and the empirical analysis focuses on how much profits from advertising, off-farm research, and farm research are affected by a one dollar increase in check-off funds, assuming equal efficiency in funds spent at each level of the marketing channel. The empirical analysis systematically considers alternative values of the underlying structural parameters of the model using Monte Carlo simulations to generate confidence intervals of marginal returns from each alternative use of the funds. Important findings are that the results with market power are indistinguishable from those obtained under pure competition and the results are most affected by input substitutability. [EconLit citations: L660]. © 2003 Wiley Periodicals, Inc. Agribusiness 19: 301-314, 2003.

Suggested Citation

  • Michael K. Wohlgenant & Nicholas E. Piggott, 2003. "Distribution of gains from research and promotion in the presence of market power," Agribusiness, John Wiley & Sons, Ltd., vol. 19(3), pages 301-314.
    • Handle: RePEc:wly:agribz:v:19:y:2003:i:3:p:301-314
    DOI: 10.1002/agr.10060
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    References listed on IDEAS

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    1. Wohlgenant, Michael K, 1999. "Product Heterogeneity and the Relationship between Retail and Farm Prices," European Review of Agricultural Economics, Oxford University Press and the European Agricultural and Applied Economics Publications Foundation, vol. 26(2), pages 219-227, June.
    2. Michael K. Wohlgenant, 1989. "Demand for Farm Output in a Complete System of Demand Functions," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 71(2), pages 241-252.
    3. Chanjin Chung & Harry M. Kaiser, 1999. "Distribution of Gains from Research and Promotion in Multistage Production Systems: Comment," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 81(3), pages 593-597.
    4. Schroeter, John R, 1988. "Estimating the Degree of Market Power in the Beef Packing Industry," The Review of Economics and Statistics, MIT Press, vol. 70(1), pages 158-162, February.
    5. Mingxia Zhang, 1997. "The Effects of Imperfect Competition on the Size and Distribution of Research Benefits," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(4), pages 1252-1265.
    6. George C. Davis & Maria Cristina Espinoza, 1998. "A Unified Approach to Sensitivity Analysis in Equilibrium Displacement Models," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 80(4), pages 868-879.
    7. Sanjib Bhuyan & Rigoberto A. Lopez, 1997. "Oligopoly Power in the Food and Tobacco Industries," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(3), pages 1035-1043.
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    Cited by:

    1. Henry W. Kinnucan & Yuqing Zheng, 2004. "Advertising's effect on the market demand elasticity: A note," Agribusiness, John Wiley & Sons, Ltd., vol. 20(2), pages 181-188.
    2. Franz Sinabell, 2005. "Marktspannen und Erzeugeranteil an den Ausgaben für Nahrungsmittel," WIFO Studies, WIFO, number 25398, Juni.

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