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Optimal Institutional Mechanisms for Funding Generic Advertising: An Experimental Analysis
Author(s) -
Messer Kent D.,
Schmit Todd M.,
Kaiser Harry M.
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.1467-8276.2005.00787.x
Subject(s) - referendum , affect (linguistics) , point (geometry) , business , public economics , advertising , economics , marketing , microeconomics , political science , philosophy , linguistics , geometry , mathematics , politics , law
Given the uncertain legal status of generic advertising programs for agricultural commodities, alternative voluntary funding institutions are investigated that could provide a high level of benefits to producers. This experimental study simulates key economic and psychological factors that affect voluntary producer contributions to generic advertising. The results suggest that producer referenda play a critical role in increasing contributions and that producer surplus is maximized by a provision point mechanism instituted by producer referendum with thresholds ranging from 68% to 90%, and expected funding from 47% to 77% of the time, depending on the level of advertising effectiveness.