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Advertising Check-Off Programmes

Author

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  • Chang, Hui-Shung
  • Kinnucan, Henry

Abstract

This paper examines the impact of a change in the advertising tax on prices, output, and welfare. Results show that a supply shift alone (i.e., advertising is ineffective and hence there is no demand shift) will result in higher retail prices, lower farm output, higher retail-farm price ratios, and losses in benefits to society. If the supply shift is accompanied by a demand shift due to effective advertising, the retail price will be higher. Farm output and the retail-farm price ratio, however, will be smaller compared to an isolated supply shift. Given the advertising elasticities found so far in empirical studies (less than 0.10), an increase in producer assessments or check-offs for the purpose of increasing demand through advertising will lead to welfare loss. Research and new product development may be .better alternatives to increasing demand from a social perspective.

Suggested Citation

  • Chang, Hui-Shung & Kinnucan, Henry, 1992. "Advertising Check-Off Programmes," 1992 Occasional Paper Series No. 6 197877, International Association of Agricultural Economists.
    • Handle: RePEc:ags:iaaeo6:197877
    DOI: 10.22004/ag.econ.197877
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    References listed on IDEAS

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    1. Bruce L. Gardner, 1975. "The Farm-Retail Price Spread in a Competitive Food Industry," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 57(3), pages 399-409.
    2. Marc Nerlove & Frederick V. Waugh, 1961. "Advertising without Supply Control: Some Implications of a Study of the Advertising of Oranges," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 43(4_Part_I), pages 813-837.
    3. Hurst, Susan & Forker, Olan, 1989. "Annotated Bibliography of Generic Commodity Promotion Research," Research Bulletins 183327, Cornell University, Department of Applied Economics and Management.
    Full references (including those not matched with items on IDEAS)

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