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Estimating Threshold Effects of U.S. Generic Fluid Milk Advertising

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  • Kenji Adachi
  • Donald J. Liu

Abstract

Adopting a spline threshold estimation procedure, this article investigates the threshold effects on demand of generic fluid milk advertising. A quarterly fluid milk demand equation with unknown thresholds is estimated. The results support the existence of a minimum threshold below which advertising has no impact on sales, and an upper threshold beyond which the law of diminishing returns dictates. Advertising is also found to have the effect of rendering fluid milk demand less elastic with respect to own price, and more elastic with respect to income. The simulations highlight the importance of accounting for threshold effects when evaluating promotion programs. Copyright 2010, Oxford University Press.

Suggested Citation

  • Kenji Adachi & Donald J. Liu, 2010. "Estimating Threshold Effects of U.S. Generic Fluid Milk Advertising," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 92(3), pages 727-739.
    • Handle: RePEc:oup:ajagec:v:92:y:2010:i:3:p:727-739
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    File URL: http://hdl.handle.net/10.1093/ajae/aap044
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    Cited by:

    1. Bo Chen & Wuyang Hu & Qingjie Zhou, 2020. "Effects of local and national advertising across brands: the case of yogurt in China," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 64(4), pages 1260-1281, October.
    2. Qinglong Gou & Juzhi Zhang & Juan Zhang & Liang Liang, 2017. "Nash Equilibria of Co-Operative Advertising Programs with Advertising Threshold Effects," International Journal of Information Technology & Decision Making (IJITDM), World Scientific Publishing Co. Pte. Ltd., vol. 16(04), pages 981-1004, July.
    3. Yu, Lili & He, Xiuli & Zhang, Juan & Xu, Chuanyong, 2021. "Horizontal cooperative advertising with advertising threshold effects," Omega, Elsevier, vol. 98(C).
    4. Huang, Song & Zhang, Xianmei & Chen, Shuting, 2021. "Information acquisition with advertising threshold effect under manufacturer encroachment in a supply chain," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 153(C).
    5. Rickard, Bradley J. & Liaukonyte, Jura & Kaiser, Harry M. & Richards, Timothy J., 2010. "Examining consumer response to commodity-specific and broad-based promotion programs for fruits and vegetables using experimental economics," Working Papers 126965, Cornell University, Department of Applied Economics and Management.

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