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Beggar-Thy-Neighbor Advertising: Theory and Application to Generic Commodity Promotion Programs

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  • Julian M. Alston
  • John W. Freebairn
  • Jennifer S. James

Abstract

Profits from generic advertising by a producer group often come partly at the expense of producers of closely related commodities. The resulting tendency toward excessive advertising is exacerbated by check-off funding. To analyze this beggar-thy-neighbor behavior we compare a scenario where different producer groups cooperate and choose their advertising expenditures jointly to maximize the sum of profits across the groups, and a scenario where they optimize independently. In an illustrative example using 1998 data for U.S. beef and pork, the noncooperatively chosen expenditure on beef and pork advertising is more than three times the cooperative optimum. Copyright 2001, Oxford University Press.

Suggested Citation

  • Julian M. Alston & John W. Freebairn & Jennifer S. James, 2001. "Beggar-Thy-Neighbor Advertising: Theory and Application to Generic Commodity Promotion Programs," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(4), pages 888-902.
    • Handle: RePEc:oup:ajagec:v:83:y:2001:i:4:p:888-902
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    File URL: http://hdl.handle.net/10.1111/0002-9092.00217
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