Postprint version. Published in Journal of Business Research, Volume 61, Issue 11, November 1, 2008, pages 1125-1135.
Copyright © 2008 Elsevier.
NOTE: At the time of publication, the author Charles F. Nicholson was not yet affiliated with Cal Poly.
The definitive version is available at http://dx.doi.org/10.1016/j.jbusres.2007.11.011.
Generic advertising of fluid milk and cheese represents the principal promotional activity undertaken with the $370 million per year provided by dairy farmers and fluid milk processors. This article describes a stock-flow-feedback simulation model that includes 17 intermediate and final dairy products, short-term and long-term milk supply response and government policies that influence the impacts of generic advertising on net revenues for dairy farmers. Permanent increases in generic advertising expenditures increase net revenues for dairy farmers, with a cumulative net benefit to cost ratio of 2.8. Permanent decreases produce a larger reduction in net revenues and indicate a net benefit to cost ratio larger than 4.5. Spending a larger proportion of existing generic advertising funds on cheese rather than fluid milk would also markedly increased dairy farmer net revenues. Generic advertising increases net revenues for dairy farmers even when industry supply response and government regulation are accounted for.
Agribusiness | Agricultural and Resource Economics | Business