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The Significance and Insignificance of Demand Analysis in Evaluating Promotion Programs
Author(s) -
Davis George C.
Publication year - 2005
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.1111/j.1467-8276.2005.00755.x
Subject(s) - promotion (chess) , liberian dollar , economics , profit (economics) , insignificance , econometrics , microeconomics , finance , political science , psychology , politics , law , psychotherapist
The estimated effects of promotion on demand are often small and insignificant. Yet, the estimated effects of promotion on industry profit are often positive and large. This puzzle is explained by demonstrating that (in)significance of promotion in a demand equation does not imply, and is not implied by, (in)significance of promotion in an industry profit equation. A Monte Carlo example is provided. The econometric modeling implications are discussed. The short‐run marginal effect of a dollar of generic beef promotion on slaughter cattle industry profit is estimated to be about $9.84 with a standard error of 3.77 for 1997.