Optimal Commodity Promotion When Downstream Markets are Imperfectly Competitive

Posted: 27 Dec 2002

See all articles by M. Zhang

M. Zhang

The California Independent Operator - Market Analysis

Richard J. Sexton

University of California, Davis - Department of Agricultural and Resource Economics

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Abstract

We investigate the optimal collection and expenditure of funds for agricultural commodity promotion in markets where the processing and distribution sectors may exhibit oligopoly and/or oligopsony power. The conditions that characterize optimal advertising intensity under perfect competition for funds generated from either per-unit or lump-sum taxes do not, in general, hold when marketing is imperfectly competitive. Simulation analyses show that imperfect competition always reduces farmers' optimal advertising expenditure and that an imperfectly competitive marketing sector may capture half or more of the benefits from the funds that are expended.

Suggested Citation

Zhang, Mingxia and Sexton, Richard J., Optimal Commodity Promotion When Downstream Markets are Imperfectly Competitive. Available at SSRN: https://ssrn.com/abstract=312042

Mingxia Zhang (Contact Author)

The California Independent Operator - Market Analysis ( email )

Folsom, CA 95763-9014
United States

Richard J. Sexton

University of California, Davis - Department of Agricultural and Resource Economics ( email )

One Shields Avenue
327 Voorhies
Davis, CA 95616
United States
530-752-2219 (Phone)

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