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Econometric evidence of cross-market effects of generic dairy advertising

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  • Metin Cakir

    (Department of Agricultural Economics, Purdue University, Indiana)

  • Joseph V. Balagtas

    (Department of Agricultural Economics, Purdue University, Indiana)

Abstract

We estimate a dairy demand system to evaluate generic dairy advertising in the US, 1990-2005. Previous empirical studies of generic dairy advertising focus only on the market of the advertised good, ignoring potential spill-over and feedback effects. We specify an LA|AIDS model of dairy demand, which allows consistent estimation of cross-price and cross-advertising effects across dairy product markets, and is flexible and satisfies the axioms of consumer theory. We use the non-linear 3SLS estimator to address endogenous prices and serial correlation, and conduct bootstrapping to generate empirical distributions of elasticity estimates. Results suggest that cross-market effects are economically and statistically important. Thus, econometric dairy demand models that ignore cross-advertising and cross-price effects are mis-specified. Previous work that ignores substitution between fluid milk and cheese overstates producers' returns to generic advertising for either product. © 2010 Wiley Periodicals, Inc.

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Bibliographic Info

Article provided by John Wiley & Sons, Ltd. in its journal Agribusiness.

Volume (Year): 26 (2010)
Issue (Month): 1 ()
Pages: 83-99

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Handle: RePEc:wly:agribz:v:26:y:2010:i:1:p:83-99

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Web page: http://onlinelibrary.wiley.com/journal/10.1002/(ISSN)1520-6297

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  1. Kaiser, Harry M. & Chung, Chanjin, 1999. "Impact of Generic Milk Advertising on New York State Markets," Research Bulletins 122677, Cornell University, Department of Applied Economics and Management.
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  8. Vidyashankara Satyanarayana & William W. Wilson & D. Demcey Johnson, 1999. "Import Demand for Malt in Selected Countries: A Linear Approximation of AIDS," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 47(2), pages 137-149, 07.
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  13. Todd M. Schmit & Harry M. Kaiser, 2004. "Decomposing the Variation in Generic Advertising Response over Time," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 86(1), pages 139-153.
  14. Henry W. Kinnucan & Yuliang Miao, 1999. "Media-specific returns to generic advertising: The case of catfish," Agribusiness, John Wiley & Sons, Ltd., vol. 15(1), pages 81-99.
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Cited by:
  1. Abraham Garcia, 2011. "The relevance of marketing in the success of innovations," JRC-IPTS Working Papers on Corporate R&D and Innovation 2011-09, Institute of Prospective Technological Studies, Joint Research Centre.

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