Procompetitive Effect of Demand-Enhancing Check-Off Programs

This article explores demand-enhancing check-off programs and how such programs may influence both private programs as well as industry market structure. Under duopoly, a firm may increase its sales through privately funding product quality improvements. However, such endogenous sunk costs may also...

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Bibliographic Details
Published in:American journal of agricultural economics 2009-05, Vol.91 (2), p.389-401
Main Authors: Crespi, John M, Marette, Stéphan
Format: Article
Language:English
Subjects:
Advertising research
Agricultural economics
agricultural industry
agricultural products
check-off programs
Commodities
Competition
Consumer demand
Consumer information
Duopolies
Duopoly
Funding
generic advertising
generic commodity promotion
Industrial market
market access
market competition
Market power
Market structure
Marketing
Marketing orders
Microeconomics
Product quality
Simulation
Studies
Sunk costs
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Summary:This article explores demand-enhancing check-off programs and how such programs may influence both private programs as well as industry market structure. Under duopoly, a firm may increase its sales through privately funding product quality improvements. However, such endogenous sunk costs may also be used to exclude a rival. Industry-funded check-off programs affect firms' strategies and can be procompetitive. The rationale lies not only in how the check-off enhancement is perceived by consumers but also in the way the check-off's crowding-out effect reduces the ability of a firm to use its private expenditures to bar a rival's market access.
ISSN:0002-9092
1467-8276
DOI:10.1111/j.1467-8276.2009.01254.x