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Is The Efficacy Of Agricultural Promotion Programs Overestimated? The Importance Of Dynamics In Advertising Demand Systems

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  • Cardwell, Ryan T.

Abstract

This article outlines the shortcomings of current techniques to assess the effectiveness of agricultural commodity promotion campaigns; particularly their neglect of the dynamic nature of the underlying demand system. The dynamics that affect advertising effectiveness over time are illustrated, and the importance of cointegration in commodity markets is outlined. A dynamic, error-correction Almost Ideal Demand System is developed to accommodate the aforementioned dynamics and this model is applied to US meat data. Short and long-run elasticities for the dynamic model using Stone'’s price index are derived and estimated. The article also includes a discussion of the use of elasticities in policy decisions.

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Bibliographic Info

Paper provided by American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association) in its series 2004 Annual meeting, August 1-4, Denver, CO with number 19949.

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Date of creation: 2004
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Handle: RePEc:ags:aaea04:19949

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Keywords: Marketing;

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  1. Granger, C. W. J. & Newbold, P., 1974. "Spurious regressions in econometrics," Journal of Econometrics, Elsevier, vol. 2(2), pages 111-120, July.
  2. Rickertsen, Kyrre & Chalfant, James A & Steen, Marie, 1995. "The Effects of Advertising on the Demand for Vegetables," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 22(4), pages 481-94.
  3. Green, Richard D. & Carman, Hoy F. & McManus, Kathleen, 1991. "Some Empirical Methods Of Estimating Advertising Effects In Demand Systems: An Application To Dried Fruits," Western Journal of Agricultural Economics, Western Agricultural Economics Association, vol. 16(01), July.
  4. Anderson, G J & Blundell, R W, 1982. "Estimation and Hypothesis Testing in Dynamic Singular Equation Systems," Econometrica, Econometric Society, vol. 50(6), pages 1559-71, November.
  5. Kinnucan, Henry W. & Chang, Hui-Shung (Christie) & Venkateswaran, Meenakshi, 1993. "Generic Advertising Wearout," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 61(03), December.
  6. Nicholas E. Piggott & James A. Chalfant & Julian M. Alston & Garry R. Griffith, 1996. "Demand Response to Advertising in the Australian Meat Industry," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 78(2), pages 268-279.
  7. Hayes, Dermot J., 1989. "Discussion: Incorporating Advertising into Demand Systems (Chapter 11)," Staff General Research Papers 458, Iowa State University, Department of Economics.
  8. H. W. Kinnucan, 1996. "A Note On Measuring Returns To Generic Advertising In Interrelated Markets," Journal of Agricultural Economics, Wiley Blackwell, vol. 47(1-4), pages 261-267.
  9. Anderson, Gordon & Blundell, Richard, 1984. "Consumer Non-Durables in the U.K. A Dynamic Demand System," Economic Journal, Royal Economic Society, vol. 94(376a), pages 35-44, Supplemen.
  10. Johansen, Soren, 1988. "Statistical analysis of cointegration vectors," Journal of Economic Dynamics and Control, Elsevier, vol. 12(2-3), pages 231-254.
  11. Deaton, Angus S & Muellbauer, John, 1980. "An Almost Ideal Demand System," American Economic Review, American Economic Association, vol. 70(3), pages 312-26, June.
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