Optimal Commodity Promotion When Downstream Markets are Imperfectly Competitive

14 Pages Posted: 1 Apr 2020

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

Multiple version iconThere are 2 versions of this paper

Date Written: May 2002

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.

Keywords: check off, oligopoly, oligopsony, optimal advertising, M310, M370, Q130, Q180

Suggested Citation

Zhang, Mingxia and Sexton, Richard J., Optimal Commodity Promotion When Downstream Markets are Imperfectly Competitive (May 2002). American Journal of Agricultural Economics, Vol. 84, Issue 2, pp. 352-365, 2002, Available at SSRN: https://ssrn.com/abstract=3565357 or http://dx.doi.org/10.1111/1467-8276.00302

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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