Retail-to-Farm Transmission of Generic Advertising Effects

The efficacy of commodity checkoff programs, especially the effects of generic advertising programs, on producers' welfare has received much attention by agricultural economists , commodity groups, and legal observers. At the center of the debate has been the question of whether producers are better off under a voluntary or mandatory checkoff program. Allocation of checkoff funds for generic advertising under a voluntary program often is characterized as a free-rider problem because producers have an incentive not to participate and free ride on those who choose to contribute, thereby resulting in failure of the program to produce enough funds to support advertising that benefits all producers. Opponents of mandatory checkoff programs generally have argued that such programs violate the principle of economic freedom. Not surprisingly, adjudication has, and continues to this day, to surround many of these programs. While some proponents of checkoff programs believe the argument for eliminating free-ridership is necessary to mandatory programs, whether in fact individual producers are better off under a mandatory program is still an open question. There is much debate in the agricultural economics literature about the relative importance of generic advertising compared to other factors influencing demand for commodities. Cross-commodity effects (the so-called " spillover " effects) of generic promotion, for example, are frequently ignored in analyses of the effectiveness of commodity promotion. These effects can be important because increased beef promotion, for example, can reduce poultry consumption; in turn, reduced poultry demand can cause the demand for beef to decline, thus subtracting from any direct effect of beef promotion on beef demand (1995) derive the economic determinants of cross-commodity impacts and show specifically how returns in an isolated market are dependent upon cross-commodity effects. Other market characteristics also can determine how generic advertising affects the demand for a commodity. For example, Kinnucan et al. (1997) show that the effects of generic advertising on meat demand are highly sensitive to health effects. They conclude that if variables accounting for health information about cholesterol and other information about red meats are included in a regression analysis to measure the demand effects of generic advertising, the measured impact of the advertising on meat consumption is smaller. Brester and Schroeder (1995) find that accounting for brand advertising also leads to smaller measured effects of generic advertising on meat consumption. Whether or not the measured effects of advertising are statistically significant also has not been adequately addressed (Alston, …