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Optimal Institutional Mechanisms for Funding Generic Advertising: An Experimental Analysis

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  • Kent D. Messer
  • Todd M. Schmit
  • Harry M. Kaiser

Abstract

Given the uncertain legal status of generic advertising programs for agricultural commodities, alternative voluntary funding institutions are investigated that could provide a high level of benefits to producers. This experimental study simulates key economic and psychological factors that affect voluntary producer contributions to generic advertising. The results suggest that producer referenda play a critical role in increasing contributions and that producer surplus is maximized by a provision point mechanism instituted by producer referendum with thresholds ranging from 68% to 90%, and expected funding from 47% to 77% of the time, depending on the level of advertising effectiveness. Copyright 2005, Oxford University Press.

Suggested Citation

  • Kent D. Messer & Todd M. Schmit & Harry M. Kaiser, 2005. "Optimal Institutional Mechanisms for Funding Generic Advertising: An Experimental Analysis," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 87(4), pages 1046-1060.
  • Handle: RePEc:oup:ajagec:v:87:y:2005:i:4:p:1046-1060
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    File URL: http://hdl.handle.net/10.1111/j.1467-8276.2005.00787.x
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    4. Messer, Kent D. & Kaiser, Harry M. & Schulze, William D., 2004. "Status Quo Bias and Voluntary Contributions: Can Lab Experiments Parallel Real World Outcomes for Generic Advertising?," Research Bulletins 122094, Cornell University, Department of Applied Economics and Management.
    5. Rose, Steven K. & Clark, Jeremy & Poe, Gregory L. & Rondeau, Daniel & Schulze, William D., 2002. "The private provision of public goods: tests of a provision point mechanism for funding green power programs," Resource and Energy Economics, Elsevier, vol. 24(1-2), pages 131-155, February.
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    7. 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.
    8. Alm, James & McClelland, Gary H & Schulze, William D, 1999. "Changing the Social Norm of Tax Compliance by Voting," Kyklos, Wiley Blackwell, vol. 52(2), pages 141-171.
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    10. John D. Jackson, 1997. "Effects of Health Information and Generic Advertising on U.S. Meat Demand," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 79(1), pages 13-23.
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    Cited by:

    1. Swallow, Stephen K., 2013. "Demand-side Value for Ecosystem Services and Implications for Innovative Markets: Experimental Perspectives on the Possibility of Private Markets for Public Goods," Agricultural and Resource Economics Review, Cambridge University Press, vol. 42(01), pages 33-56, April.
    2. Bush, Glenn & Hanley, Nicholas & Moro, Mirko & Rondeau, Daniel, 2012. "Measuring the Local Opportunity Costs of Conservation: A Provision Point Mechanism for Willingness-to-Accept," Stirling Economics Discussion Papers 2012-14, University of Stirling, Division of Economics.
    3. Maria Alejandra Velez & James J. Murphy & John K. Stranlund, 2006. "Within and Between Group Variation of Individual Strategies in Common Pool Resources: Evidence from Field Experiments," Working Papers 2006-4, University of Massachusetts Amherst, Department of Resource Economics.
    4. Newell, Laurie W. & Swallow, Stephen K., 2013. "Real-payment choice experiments: Valuing forested wetlands and spatial attributes within a landscape context," Ecological Economics, Elsevier, vol. 92(C), pages 37-47.
    5. Kent D. Messer & Harry M. Kaiser & Gregory L. Poe, 2007. "Voluntary Funding for Generic Advertising Using a Provision Point Mechanism: An Experimental Analysis of Option Assurance," Review of Agricultural Economics, Agricultural and Applied Economics Association, vol. 29(3), pages 612-631.
    6. repec:spr:custns:v:4:y:2017:i:1:d:10.1007_s40547-017-0070-2 is not listed on IDEAS
    7. Groothuis, Peter A. & Whitehead, John C., 2009. "The Provision Point Mechanism and Scenario Rejection in Contingent Valuation," Agricultural and Resource Economics Review, Cambridge University Press, pages 271-280.
    8. Messer, Kent D. & Zarghamee, Homa & Kaiser, Harry M. & Schulze, William D., 2007. "New hope for the voluntary contributions mechanism: The effects of context," Journal of Public Economics, Elsevier, vol. 91(9), pages 1783-1799, September.

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