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Profitability Of Incremental Generic Promotion Expenditure By Australian Dairy Farmers

Author

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  • Hill, Debbie J.
  • Piggott, Roley R.
  • Griffith, Garry R.

Abstract

The motivation for this study rests on two factors. First, Australian dairy farmers spend around $20 million annually on generic promotion and estimates of the returns from this expenditure are required to facilitate efficient investment decisions. Second, while the Australian dairy industry is currently highly regulated despite a substantial reduction in assistance over the past decade, manufacturing milk subsidies are to be eliminated by 2000 and market milk regulations are being reviewed. The profit potential of promotion may vary with the degree of regulation, so past estimates of the returns from promotion may not hold in the competitive environment of the future. Hence, the aim of this study is to examine the effects of government intervention on the profitability for dairy farmers of incremental changes in generic dairy promotion expenditure using a perfectly competitive market as a reference point. Competitive market price and quantity outcomes for the Australian dairy industry are estimated. The impacts of increments in dairy product and competing product generic promotion expenditures on dairy farmers' profits are assessed using equilibrium displacement modelling. Finally, graphical procedures are used to examine the effects of dairy industry regulation on the profitability of dairy promotion.

Suggested Citation

  • Hill, Debbie J. & Piggott, Roley R. & Griffith, Garry R., 1999. "Profitability Of Incremental Generic Promotion Expenditure By Australian Dairy Farmers," Working Papers 12913, University of New England, School of Economics.
  • Handle: RePEc:ags:uneewp:12913
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    File URL: http://purl.umn.edu/12913
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    References listed on IDEAS

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    1. D.J. Hill & Roley R. Piggott & Garry R. Griffith, 1996. "Profitability Of Incremental Expenditure On Fibre Promotion," Australian Journal of Agricultural and Resource Economics, Australian Agricultural and Resource Economics Society, vol. 40(3), pages 151-174, December.
    2. Thompson, Stanley R., 1979. "The Response of Milk Sales to Generic Advertising and Producer Returns in the Rochester, New York Market," Staff Papers 183721, Cornell University, Department of Applied Economics and Management.
    3. R. M. Parish, 1962. "The Costs Of Protecting The Dairying Industry," The Economic Record, The Economic Society of Australia, vol. 38(82), pages 167-182, June.
    4. Hill, Debbie J. & Piggott, Roley R. & Griffith, Garry R., 1996. "Profitability Of Incremental Expenditure On Fibre Promotion," Australian Journal of Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 40(03), December.
    5. Henry Kinnucan, 1987. "Effect of Canadian Advertising on MilK Demand: The Case of the Buffalo, New York Market," Canadian Journal of Agricultural Economics/Revue canadienne d'agroeconomie, Canadian Agricultural Economics Society/Societe canadienne d'agroeconomie, vol. 35(1), pages 181-196, March.
    6. Milham, Nick & Davenport, Scott V. & Penm, Jammie H., 1990. "Substitution Relationships in Australian Beverage Consumption," 1990 Conference (34th), February 13-15, 1990, Brisbane, Australia 145336, Australian Agricultural and Resource Economics Society.
    7. Freebairn, John W., 1992. "Dairy Industry Policy," Review of Marketing and Agricultural Economics, Australian Agricultural and Resource Economics Society, vol. 60(01), April.
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