Middlemen behaviour and generic advertising rents in competitive interrelated industries

This article focuses on the role of middlemen in determining the returns to generic advertising in a competitive industry where supply is uncontrolled, the price of marketing inputs is endogenous, and retail markets are interrelated through consumer preferences. Theoretical analysis suggests farm-gate returns (quasi-rents) are overstated when input substitution at middlemen level is ignored, a result confrmed in the empirical application. As for mark-up behaviour, represented by the farm-retail price transmission elasticity, a general result is that farm-gate returns to generic advertising always increase as the transmission elasticity decreases, provided retail demand is more elastic than input substitution. Endogenising the price of marketing inputs has little effect on advertising rents.


Issue Date:
1997
Publication Type:
Journal Article
PURL Identifier:
http://purl.umn.edu/118014
Published in:
Australian Journal of Agricultural and Resource Economics, Volume 41, Issue 2
Page range:
191-207
Total Pages:
17




 Record created 2017-04-01, last modified 2017-08-26

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