Premium
Econometric evidence of cross‐market effects of generic dairy advertising
Author(s) -
Cakir Metin,
Balagtas Joseph V.
Publication year - 2010
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.20203
Subject(s) - economics , econometrics , estimator , product (mathematics) , estimation , bootstrapping (finance) , axiom , econometric model , microeconomics , statistics , mathematics , geometry , management
We estimate a dairy demand system to evaluate generic dairy advertising in the US, 1990–2005. Previous empirical studies of generic dairy advertising focus only on the market of the advertised good, ignoring potential spill‐over and feedback effects. We specify an LA/AIDS model of dairy demand, which allows consistent estimation of cross‐price and cross‐advertising effects across dairy product markets, and is flexible and satisfies the axioms of consumer theory. We use the non‐linear 3SLS estimator to address endogenous prices and serial correlation, and conduct bootstrapping to generate empirical distributions of elasticity estimates. Results suggest that cross‐market effects are economically and statistically important. Thus, econometric dairy demand models that ignore cross‐advertising and cross‐price effects are mis‐specified. Previous work that ignores substitution between fluid milk and cheese overstates producers' returns to generic advertising for either product. © 2010 Wiley Periodicals, Inc.