Beggar‐Thy‐Neighbor Advertising: Theory and Application to Generic Commodity Promotion Programs

15 Pages Posted: 24 Mar 2020

See all articles by Julian Alston

Julian Alston

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

John W. Freebairn

University of Melbourne - Department of Economics

Jennifer S. James

College of Agricultural Sciences, Department of Agricultural Economics and Rural Sociology

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Date Written: November 2001

Abstract

Profits from generic advertising by a producer group often come partly at the expense of producers of closely related commodities. The resulting tendency toward excessive advertising is exacerbated by check‐off funding. To analyze this beggar‐thy‐neighbor behavior we compare a scenario where different producer groups cooperate and choose their advertising expenditures jointly to maximize the sum of profits across the groups, and a scenario where they optimize independently. In an illustrative example using 1998 data for U.S. beef and pork, the noncooperatively chosen expenditure on beef and pork advertising is more than three times the cooperative optimum.

Keywords: cooperative and noncooperative solutions, excessive advertising, mandated commodity promotion programs, U.S. beef and pork, M370, Q130, Q180

Suggested Citation

Alston, Julian and Freebairn, John W. and James, Jennifer S., Beggar‐Thy‐Neighbor Advertising: Theory and Application to Generic Commodity Promotion Programs (November 2001). American Journal of Agricultural Economics, Vol. 83, Issue 4, pp. 888-902, 2001, Available at SSRN: https://ssrn.com/abstract=3558618 or http://dx.doi.org/10.1111/0002-9092.00217

Julian Alston (Contact Author)

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

One Shields Avenue
Davis, CA 95616
United States

John W. Freebairn

University of Melbourne - Department of Economics ( email )

Victoria 3010, 3010
Australia

Jennifer S. James

College of Agricultural Sciences, Department of Agricultural Economics and Rural Sociology ( email )

University Park, PA 16802-3306
United States

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