Agricultural Economics

Agricultural Economics

Free-riding intensity index in the market of Generic and Brand advertising of dairy products in Iran

Document Type : Research Paper

Author
Habib Shahbazi
Department of Agricultural Economics Sayyed Jamaleddin Asadabadi University, Asadabad, Hamedan
10.22034/iaes.2023.2008642.2010
Abstract
Product differentiation is one of the ways to attract customers, improve sales and ultimately increase firm profits under the market behavior sub-section of the structure-behavior-performance paradigm. Advertising is one of the methods of creating this distinction in the minds of customers and consumers. Generic and brand advertising, in addition to creating profit for the company and producers active in the field of advertising, also creates benefits for other companies due to the existence of the "free ride" effect. In this research, due to the importance of dairy products in the consumption basket of households, as well as the extensive activity of producers, unions and associations related to the dairy industry and the government at different levels of marketing these products, it has been tried to measure the intensity of free-riding in GA and BA for processed milk (PM) and cheese in Iran and its effect on the sales performance of companies using the approach of Isariyawongse et al. and Depken et al to be evaluated for the period 1961-2021. The value of free riding intensity index in processed milk GA and BA is on average equal to 11.420 and 8.390, respectively. Also, the amount of free riding in BA in all scenarios of advertising intensity index is much lower than GA in PM. Although the intensity index of free riding in BA in cheese product is lower than GA in it; But its value is less than one and is equal to 0.03228 and 0.00543, respectively, which indicates the absence of free riding in GA and BA in the cheese product. Finally, the results show that there is a high correlation between the intensity index of free riding in processed milk GA and BA and the amount of annual sales (0.98 and 0.94, respectively), which are significant at the 1% level.
Keywords
Marketing Activities
Product Differentiation
Intermediate Goods
Vertical Markets
Marginal Profit

Subjects

Askar, S.S., & Al-khedhairi, A. (2017). Analysis of Nonlinear Duopoly Games with Product Differentiation: Stability, Global Dynamics, and Control. Discrete Dynamics in Nature and Society, 2017, 1-13. 
Bass, F. M., Krishnamoorthy, S., Prasad, A., & Sethi, A. (2005). Generic and brand advertising strategies in a dynamic duopoly. Marketing Science, 24(4), 556-568. https://doi.org/10.1287/mksc.1050.0119
Bishop, P., & Charles, C. (2004). Dairy Market Impacts of US Milk Protein Imports and Trade Policy Alternatives. Department of Applied Economics and Management. Research Bulletins, Cornell University. https://doi.org/10.22004/ag.econ.122102
Blaylock, J., & Blisard, W. (1988). Effects of Advertising on the Demand for cheese. Washington, D.C.: Economic Research Service, U.S. Department of Agriculture. https://doi.org/10.22004/ag.econ.278346
Bloch, F., & Manceau, D. (1999). Persuasive advertising in Hotelling's model of product differentiation. International Journal of Industrial Organization, 17(4), 557-574. https://doi.org/10.1016/S0167-7187(98)00014-9
Bulik, B. (2021). The top 10 ad spenders in Big Pharma for 2020. US.: fiercepharma. Retrieved from https://www.fiercepharma.com/special-report/top-10-ad-spenders-big-pharma-for-2020
Cao, H.J., Zhang, Y., Zhang, H., & Zhang, Z. (2013). Cooperation in Global Modular Production Network: an Analysis Based on Game Theory and Evolution Model. International journal of applied mathematics and statistics, 49, 289-298.
Chizari, A., shokoohi, Z., Salami, H., & Hosseini, S. (2015). Existence of Habits and Empirical Demand Analysis: A Case Study for Urban Households’ Dairy Products Demand in Iran. Agricultural Economics, 9(2), 19-35.[In Farsi]
Crespi, J. (2021). Generic Advertising. (A. Marciano, & G. Ramello, Eds.) New York: Encyclopedia of Law and Economics. https://doi.org/10.1007/978-1-4614-7883-6_784-1
Crespi, J. M. (2007). Generic Advertising and Product Differentiation Revisited. Journal of Agricultural & Food Industrial Organization, 5(3). https://doi.org/10.2202/1542-0485.1153
Crespi, J., & Stephan, M. (2002). Generic Advertising and Product Differentiation. American Journal of Agricultural Economics, 84(3), 691-701. https://doi.org/10.1111/1467-8276.00328
Depken, C., Kamerschen, D., & Snow, R. (2002). Generic Advertising of Intermediate Goods: Theory and Evidence on Free Riding. Review of Industrial Organization, 20(3), 205-220. https://doi.org/10.1023/A:1015069023770
Food and Agricultural organization. (2023, January 9). Faostat. Retrieved from FAO: https://www.fao.org/faostat/en/#data/QV.
Handouf, S., Sabir, E., Elhammouti, H., & Sadik, M. (2018). Availability and Pricing Combined Framework for Rivalry Flying Access Network Providers. 2018 IEEE Global Communications Conference, 1-6.
https://doi.org/10.1109/GLOCOM.2018.8647951
Hokmollahi, F., & Ehsani, M. (2020). haracteristics of Nodooshan Goat Milk and Identification of Volatile Compounds in Traditional Nodooshan Goat Cheese during Ripening. Iranian J Nutr Sci Food Technology, 14(4), 67-76. Retrieved from http://nsft.sbmu.ac.ir/article-1-2771-fa.html [In Farsi]
Hosseini, S., & Erfnian, Z. (2008). Factors affecting the demand for milk and dairy product: with an emphasis on advertising (study of the Iranian milk industry. Iranian Journal of Agricultural Economics and Development research, 39(1), 1-9. https://doi.org/ 20.1001.1.20084838.1387.39.1.2.2[In Farsi]
Isariyawongse, K., Kudo, Y., & Tremblay, V. (2007). Generic and brand advertising in markets with product differentiation. Journal of Agricultural and Food Industrial Organization, 5(1), 1-15. https://doi.org/10.2202/1542-0485.1179
Ji, S. (2016). On Credit-based Incentive Mechanisms of Voluntary User Comment Reviewing in Social Networks. ArXiv, abs/1608.04090. https://doi.org/10.48550/arXiv.1608.04090
Kim, K., & Roh, J. (2003). The Effects of Advertising on Milk Demand Elasticities and Structural Changes in Korean Milk Markets. American Agricultural Economics Association Annual Meeting (pp. 1-16). Montreal, Canada: American Agricultural Economics Association. https://doi.org/10.22004/ag.econ.22155
Krishnamurthy, S. (2000). Enlarging the pie vs increasing one’s slice: An analysis of the relationship between generic and brand advertising. Marketing Letters,, 11, 37-48. https://doi.org/10.1023/A:1008146709712
Krishnamurthy, S. (2001). The effect of provision points on generic advertising funding. Marketing Letters, 12(4),
 315-325. https://doi.org/10.22004/ag.econ.21371
Liang, Y., & Zhou, Z. (2013). Essential norm of the product of differentiation and composition operators between Bloch-type spaces. Archiv der Mathematik, 100, 347-360. https://doi.org/10.1007/S00013-013-04999-7
Luo, Y., Gao, L., Huang, J. (2016). Economics Theory Basics. In: Economics of Database-Assisted Spectrum Sharing. Wireless Networks. Springer, Cham. https://doi.org/10.1007/978-3-319-43231-1_2
Messer, K. D., Kaiser, H. M., & Schulze, W. D. (2004). Status-Quo-Bias and Voluntary Contributions: Can Lab Experiments Parallel Real World Outcomes for Generic Advertising? 2004 Annual meeting, August 1-4, Denver, CO 20072, American Agricultural Economics Association. https://doi.org/10.22004/ag.econ.20072
Natsuki, S., Syusuke, T., Katsutoshi, Y., & Tomomichi, S. (2014). Evaluation of price elasticity and brand loyalty in milk products. Procedia Computer Science, 35, 1482 – 1487. https://doi.org/10.1016/j.procs.2014.08.213
Navarro, J. G. (2023a). Media advertising spending in the United States from 2020 to 2024. US.: statista. Retrieved from https://www.statista.com/statistics/272314/advertising-spending-in-the-us/
Navarro, J. G. (2023b). Advertising spending in Latin America 2014-2022. US.: Statista. Retrieved from https://www.statista.com/statistics/238390/latin-american-advertising-revenue/
Nicholson, C., & Kaiser, H. (2008). Dynamic market impacts of generic dairy advertising. Journal of Business Research, 61(11), 1125-1135. https://doi.org/10.1016/j.jbusres.2007.11.011
Poe, G. L., Kaiser, H. M., & Messer, K. D. (2006). Voluntary Funding for Generic Advertising Using a Provision Point Mechanism: An Experimental Analysis of Option Assurance. 2006 Annual meeting, July 23-26, Long Beach, CA 21371, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association). https://doi.org/10.22004/ag.econ.21371
Pritchett, J., Liu, D., & Kaiser, H. (1997). Generic milk advertising: optimal allocation among types of media (No. 35817). 1997 Annual Meeting, July 13-16, 1997, Reno\ Sparks, Nevada, Western Agricultural Economics Association. https://doi.org/10.22004/ag.econ.35817
Pishbahar, E., & Kheiri Nataj Firoozjah, M. (2014). Evaluation the dairy demand of Iran using almost ideal demand system (AIDS). Iranian Journal of Agricultural Economics and Development Research, 45(4), 693-701. https://doi.org/10.22059/ijaedr.2014.53843[In Farsi]
Roma, P., & Perrone, G. (2010). Generic Advertising, Brand Advertising and Price Competition: An Analysis of Free-Riding Effects and Coordination Mechanisms. Review of Marketing Science, 8(4), 1-26. https://doi.org/10.2202/1546-5616.1122
Shahbazi, H. (2015). Generic Advertising Optimum Budget for Iran’s Milk Industry. Journal of Agricultural Economics and Development, 29(4), 389-400. https://doi.org/10.22067/JEAD2.V29I4.49202[In Farsi]
Shahbazi, H. (2016). Generic Dairy Advertising Effects in a Multi-Market Equilibrium. Journal of Agricultural Economics and Development, 10(3), 89-112. https://doi.org/10.22034/IAES.2016.22185[In Farsi]
Shahbazi, H. (2021). The optimal budget of Milk Generic advertising: an application of different allocation methods. Journal of Agricultural Economics and Development, 52(2). https://doi.org/10.22059/IJAEDR.2021.285992.668791[In Farsi]
Shahbazi, H. (2023). Measuring market behavior in the dairy products industry using the profit-oriented function. Journal of Agricultural Economics and Development, 37 (3), Forcecomming. https://doi.org/10.22067/jead.2023.80560.1175[In Farsi]
Shahbazi, H., & Faryadras, V. (2018). Milk optimal generic advertising expenditure in an imperfect competitive marketing level. Agricultural Economics and Development Journal, 26(2), 217-224. https://doi.org/10.30490/AEAD.2018.73561[In Farsi]
Shahbazi, H., & Samdeliri, A. (2019). Application of multi-market equilibrium model on general advertising significance model in profit of milk industry in Iran. Agricultural Economics and Development Journal, 33(1), 25-39. https://doi.org/ 10.22067/JEAD2.V0I0.69994[In Farsi]
Shahbazi, H., Kavoosi, M., Peikani, G., Erfanian, Z., & Abedi, S. (2009). Estimation of monopoly welfare loss in Iranian milk production industry. Agricultural Economics and Development, 17(1), 39-53. https://doi.org/10.30490/AEAD.2009.58826[In Farsi]
Shephard, R. (1953). Theory of Cost and Production Functions. Princeton: Princeton University Press. https://doi.org/10.1515/9781400871087
Statista. (2023). Milk Promotion. The Statistics Portal.
World Population Review. (2023a). Milk Consumption by Country. Retrieved from https://worldpopulationreview.com/country-rankings/milk-consumption-by-country
World Population Review. (2023b). Cheese Consumption by Country. Retrieved from https://worldpopulationreview.com/country-rankings/cheese-consumption-by-country
 
Agricultural Economics
Volume 18, Issue 2 - Serial Number 2
Spring 2024
Pages 117-147