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Excise Taxes And Commodity Promotion: Bayesian Retrieval Of The Optimum

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  • Holloway, Garth J.

Abstract

This article shows how the solution to the promotion problem--—the problem of locating the optimal level of advertising in a downstream market--—can be derived simply, empirically, and robustly through the application of some simple calculus and Bayesian econometrics. We derive the complete distribution of the level of promotion that maximizes producer surplus and generate recommendations about patterns as well as levels of expenditure that increase net returns. The theory and methods are applied to quarterly series (1978:2S1988:4) on red meats promotion by the Australian Meat and Live-Stock Corporation. A slightly different pattern of expenditure would have profited lamb producers.

Suggested Citation

  • Holloway, Garth J., 2000. "Excise Taxes And Commodity Promotion: Bayesian Retrieval Of The Optimum," Journal of Agribusiness, Agricultural Economics Association of Georgia, vol. 18(2).
  • Handle: RePEc:ags:jloagb:14660
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    File URL: http://purl.umn.edu/14660
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    References listed on IDEAS

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    1. Dreze, Jacques H. & Richard, Jean-Francois, 1983. "Bayesian analysis of simultaneous equation systems," Handbook of Econometrics,in: Z. Griliches† & M. D. Intriligator (ed.), Handbook of Econometrics, edition 1, volume 1, chapter 9, pages 517-598 Elsevier.
    2. 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.
    3. 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.
    4. Holloway, Garth J., 1998. "Excise Taxes and Commodity Promotion: A Diagrammatic Motivation," Journal of Agribusiness, Agricultural Economics Association of Georgia, vol. 16(2).
    5. Chib, Siddhartha, 1992. "Bayes inference in the Tobit censored regression model," Journal of Econometrics, Elsevier, vol. 51(1-2), pages 79-99.
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