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Distribution of gains from research and promotion in the presence of market power
Author(s) -
Wohlgenant Michael K.,
Piggott Nicholas E.
Publication year - 2003
Publication title -
agribusiness
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.57
H-Index - 43
eISSN - 1520-6297
pISSN - 0742-4477
DOI - 10.1002/agr.10060
Subject(s) - econlit , economics , market power , imperfect competition , liberian dollar , agribusiness , promotion (chess) , econometrics , microeconomics , distribution (mathematics) , competition (biology) , agriculture , monopoly , ecology , medline , finance , politics , political science , law , biology , mathematical analysis , mathematics
This article evaluates how marginal returns to producers from promotion and research are affected when market intermediaries have market power in the retail market. Using an equilibrium displacement model, the relative importance of market power is evaluated for a “typical” food‐processing industry, and the empirical analysis focuses on how much profits from advertising, off‐farm research, and farm research are affected by a one dollar increase in check‐off funds, assuming equal efficiency in funds spent at each level of the marketing channel. The empirical analysis systematically considers alternative values of the underlying structural parameters of the model using Monte Carlo simulations to generate confidence intervals of marginal returns from each alternative use of the funds. Important findings are that the results with market power are indistinguishable from those obtained under pure competition and the results are most affected by input substitutability. [EconLit citations: L660]. © 2003 Wiley Periodicals, Inc. Agribusiness 19: 301–314, 2003.