Relationship Between Partial and Total Responses to Advertising with Application to U.S. Meats
AbstractBuse’s concept of total response is extended to advertising effects. Results suggest that partial advertising elasticities overstate advertising’s ability to increase market demand. One implication is that advertising bans (e.g., for alcohol and tobacco) are apt to be less effective than indicated by partial advertising elasticities estimated from econometric models. Extending the concept of total response to price effects, the total advertising “flexibility” sets the lower bound on the optimal advertising-sales ratio and subsumes the Dorfman-Steiner and Nerlove-Waugh theorems as special cases. Applying the total flexibility concept to U.S. meats, results suggest the beef, pork and poultry industries are under-investing in advertising. However, in the case of beef this conclusion hinges on the assumption that retaliation by pork brand advertisers is minimal, which needs to be tested.
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Bibliographic InfoPaper provided by Cornell University, Department of Applied Economics and Management in its series Research Bulletins with number 122634.
Date of creation: Apr 2002
Date of revision:
advertising bans; Dorfman-Steiner theorem; generic advertising; total elasticities; Livestock Production/Industries; Marketing;
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