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Optimal Generic Advertising under Bilateral Imperfect Competition between Processors and Retailers

  • Chung, Chanjin
  • Eom, Young Sook
  • Yang, Byung Woo
  • Han, Sungill

The purpose of this paper is to examine the impact of bilateral imperfect competition between processors and retailers and of import supply on optimal advertising intensity, advertising expenditures, and checkoff assessment rates. First, comparative static analyses were conducted on the newly developed optimal advertising intensity formula. Second, to consider the endogenous nature of optimal advertising, a linear market equilibrium model was developed and applied to the U.S. beef industry. Results showed that the full consideration of retailer-processor bilateral market power lowered the optimal values of assessment rates, advertising expenditures, and advertising intensity for the checkoff board while consideration of importers increases the optimal values. The results indicate that ignoring the import sector in optimal generic advertising modeling should underestimate these optimal values, while ignoring the bilateral market power between processors and retailers overestimates the values.

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Paper provided by Agricultural and Applied Economics Association in its series 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. with number 149582.

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Date of creation: 2013
Date of revision:
Handle: RePEc:ags:aaea13:149582
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  1. Kinnucan, Henry W., 2002. "Optimal Generic Advertising In An Imperfectly Competitive Food Industry With Variable Proportions," 2002 Annual meeting, July 28-31, Long Beach, CA 19775, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
  2. Chanjin Chung & Emílio Tost�o, 2012. "Effects of horizontal consolidation under bilateral imperfect competition between processors and retailers," Applied Economics, Taylor & Francis Journals, vol. 44(26), pages 3379-3389, September.
  3. Kinnucan, Henry W & Myrland, Oystein, 2000. "Optimal Advertising Levies with Application to the Norway-EU Salmon Agreement," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 27(1), pages 39-57, March.
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  8. Villas-Boas, Sofia B., 2007. "Vertical relationships between manufacturers and retailers: inference with limited data," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt6gz1t778, Department of Agricultural & Resource Economics, UC Berkeley.
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