A test for starting point bias in the iterative bidding format of contingent valuation studies is developed in this paper. The test is applied to the data from three contingent valuation studies and to the data from a simulated market study. Starting point bias was found to be a problem in all three contingent valuation studies. A starting point problem did not exist in the simulated market suggesting that starting point bias may be an artifact of hypothetical markets. The validity of using bidding games with fixed starting bids is evaluated.

Starting Point Bias in Contingent Valuation Bidding Games

This paper develops a general model that addresses the starting point bias in the dichotomous choice evaluation data by incorporating both the anchoring effect and yea-saying bias. The model is applied to a contingent valuation study that evaluated the health benefits of air quality improvement in three major metropolitan areas in Taiwan. The empirical evidence shows a strong anchoring effect but an insignificant yea-saying bias. The results show a serious understated willingness to pay if the biases in anchoring and yea-saying are not controlled.

A General Model of Starting Point Bias in Double-Bounded Dichotomous Contingent Valuation Surveys

Because firms do not publicly report marketing expenditures, most studies of the link between firm value and marketing consider advertising (which is publicly reported for many firms) a proxy for marketing. The authors extend those studies in two ways. First, they broaden the proxy for marketing by considering both advertising and sales force. Second, they offer an explanation for the fact that some studies linking advertising to firm value find a positive relationship, whereas others find a negative relationship. The accounting literature suggests that the link to firm value for both unexpected growth in sales force expenditures and unexpected growth in advertising expenditures should be negative. The authors confirm the hypothesized accounting relationship for sales force expenditures but find a contingent relationship for advertising expenditures. Firm value and unexpected growth in advertising expenditures are negatively related for firms that advertise below the advertising response threshol...

Stock Market Reaction to Unexpected Growth in Marketing Expenditure: Negative for Sales Force, Contingent on Spending Level for Advertising

There exists a large literature on price transmission in agro-food sectors. However,
a great majority of empirical studies focus on the existence of asymmetry and, by
and large, do not investigate the reason for its presence or absence. This is in sharp
contrast to the theoretical literature that provides a number of explanations of why
we should expect (a)symmetry. In response, this paper investigates the reasons for
asymmetric price transmission in the agro-food chain, using meta-analysis of exist-
ing studies. Our focus is on the organizational and institutional characteristics of
the agro-food supply chain. Our findings suggest that asymmetric price transmis-
sion in farm
–
retail relationships is more likely to occur in sectors/countries with
more fragmented farm structure, higher governmental support and more restrictive
regulations on price controls in the retail sector. On the other hand, more restric-
tive regulations on entry barriers in the retail sector and the relative importance of
the sector tend to promote symmetric farm
–
retail price transmission. The latter is
also more likely in the presence of a strong processing industr

Does market structure influence price transmission in the agro-food sector?

There exists a large literature on price transmission in agro-food sectors. However, a great majority of empirical studies focus on the existence of asymmetry and, by and large, do not investigate the reason for its presence or absence. This is in sharp contrast to the theoretical literature that provides a number of explanations of why we should expect (a)symmetry. In response, this paper investigates the reasons for asymmetric price transmission in the agro-food chain, using meta-analysis of existing studies. Our focus is on the organizational and institutional characteristics of the agro-food supply chain. Our findings suggest that asymmetric price transmission in farm–retail relationships is more likely to occur in sectors/countries with more fragmented farm structure, higher governmental support and more restrictive regulations on price controls in the retail sector. On the other hand, more restrictive regulations on entry barriers in the retail sector and the relative importance of the sector tend to promote symmetric farm–retail price transmission. The latter is also more likely in the presence of a strong processing industry.

Does Market Structure Influence Price Transmission in the Agro‐food Sector? A Meta‐analysis Perspective

https://pages.uoregon.edu/cameron/WEAI_AERE_2009/paper_Konishi.pdf

A framework for estimating willingness-to-pay to avoid endogenous environmental risks

Introduction In September 2005, the first case of bovine tuberculosis (BTB) in 34 years was discovered in Minnesota and led to a loss of Minnesota's bovine TB free status. In October 2007 and January and February 2008, four additional cattle herds and deer infected with BTB were discovered in Roseau and Beltrami counties and Minnesota's BTB status was changed from " modified accredited advanced " to " modified accredited " in April 2008. Each of these designations has increased regulatory requirements (and costs) for animal testing, record keeping, eradication practices, slaughtering and shipments of cattle within state and across state lines. As a result of the large anticipated costs of a Minnesota statewide designation of modified accredited status for bovine tuberculosis, Minnesota applied to the USDA Animal and Plant Health Inspection Service (APHIS) for split state status. The split state status would allow the northwest part of Minnesota where the BTB cases were found to remain classified as modified accredited for BTB and the rest of the state to be classified as modified accredited advanced, a less restrictive and less costly designation. The State of Minnesota completed a management plan and APHIS completed their risk assessment study (USDA, APHIS, June 24, 2008) informed by Minnesota's management plan. In October 2008, Minnesota was granted " split state status " Marshall and Lake of the Woods) approximate the region in Minnesota now designated as modified accredited (MA). The rest of the state is now designated as modified accredited advanced (MAA). This designation will greatly reduce the cost impacts of BTB on the Minnesota cattle industry. The APHIS report included the expected costs to the state of 3 managing and eradicating bovine TB, but did not evaluate what the expected cost of bovine TB would be to the beef industry itself. This report quantifies the economic impacts of BTB on Minnesota beef cattle producers and related industries. Representative cattle production systems are simulated and the costs of BTB response are incorporated into these systems using a partial budgeting approach. A partial equilibrium market model is then used to simulate the impact of these cost increases on the production of cattle and the prices received by the beef industry in Minnesota. This model also allows for changing assumptions regarding price discounts cattle producers might face given the BTB positive status. Finally, an input-output analysis using IMPLAN is used to evaluate the total economic impacts …

/pdf/economic-impact-of-bovine-tuberculosis-on-minnesota-s-cattle-2yqb03u0tm.pdf

Economic Impact of Bovine Tuberculosis on Minnesota’s Cattle and Beef Sector

This paper addresses the issues of threshold effects pertaining to U.S. generic fluid milk advertising. A threshold delineates the level of advertising intensity that has to be met to generate a specific level of sales effect. Given that promotional organizations face budget constraints, it is of particular interest to ascertain if there exists a minimum threshold that an advertising campaign has to cross to yield a non)trivial sales effect. Despite strong beliefs among market practitioners, the existence of advertising threshold effects has rarely been studied by researchers interested in agricultural commodity promotions. Adopting a spline threshold estimation procedure, this paper represents the first attempt to identify thresholds in the sales effect of generic advertising and the impacts the thresholds may have on consumers’ reactions to changes in important economic variables such as own price and income. Using quarterly U.S. generic fluid milk advertising data from 1975 to 2004, a regime)dependent fluid milk demand equation is estimated. The results support the existence of advertising thresholds and show that generic advertising has the effect of rendering fluid milk demand less elastic with respect to own price and more elastic with respect to income. The results of policy simulation further highlight the importance of accounting for the threshold effects of advertising in evaluating promotion program effectiveness.

Estimating Threshold Effects of U.S. Generic Fluid Milk Advertising

Linear regression is often used to measure economic relationships in order to understand the underlying structure and obtain forecasts. Clearly, a major advantage of a linear model is its simplicity, increasing the likelihood of obtaining a robust estimate of the parameter that is not overly sensitive to model specifica tion and choice of numerical method. The clas sic Chow test for a structural break involves

Estimating Long-Run Price Relationship with Structural Change of Unknown Timing: An Application to the Japanese Pork Market

The purpose of this paper is to investigate the threshold effect of the U.S. generic fluid milk and cheese advertising programs. A threshold delineates the level of advertising intensity that has to be met to generate a specific level of sales effect. Given that promotional organizations face budget constraints, it is of particular interest to ascertain if there exists a minimum threshold that an advertising campaign has to overcome to yield a non-trivial sales effect. To the best of our knowledge, there is no study focusing on the threshold effects of generic advertising of agricultural products. The estimation results confirm that, for both fluid milk and cheese advertisings, there exist three thresholds which partition the quarterly observations between 1975 and 2004 into four possible regimes depending on the level of advertising intensity in each period. The generic fluid milk advertising goodwill coefficient is found to be relatively small for the regime with the lowest advertising intensity, building up to a higher level as the regime progresses, but eventually drops to lower levels as the intensity continues to grow, reflecting the eventual arrival of the diminishing returns of advertising. The pattern of initial build up, however, is not detected in the cheese equation in which the estimated goodwill parameter starts at a rather large magnitude in the first regime, but declines monotonically and drastically in the second and third regimes, only to become statistically not different from zero in the fourth regime. To evaluate the performance of the National Dairy Board (NDB) programs over time, the estimated demand equations are used to simulate the effect on sales of a change in the fluid milk and cheese advertising expenditure paths, focusing on the first ten years and the second ten years of the NDB’s operation since 1984. While an increase in advertising expenditures has the effect of increasing sales (holding regime configuration constant), it is found that this scale effect of additional advertising may be outweighed by the negative effect of a downward shift in the goodwill coefficient arising from regime change. In other words, sales can be made lower as the result of increased advertising, a feature not supported by the conventional model of no threshold. Indeed, in the cheese case advertising elasticity is found to be negative when evaluated at some levels larger than the historical pattern. Compared to the result pertaining to the first ten years, the benefit-cost ratio of the fluid milk program suggests that the NDB has moved its fluid milk operation scale closer to optimal during the second ten years. The optimal fluid milk advertising expenditure level for the second ten years is found to be between 105 and 110 percent of the historical level. This paper will contribute to the discussion among researchers, program managers, and industry participants on the importance of entertaining the threshold effect of advertising when examining program effectiveness and the optimal allocation of program dollars. Researchers need to be aware of the potential pitfalls of their conventional econometric estimates (and, hence, the limitations of their policy suggestions) when the true model is of threshold type. Program managers have argued that advertising effectiveness may vary, depending on the intensity of their campaigns and have long sought this information in their spending allocation decisions. The insights provided in this paper will enhance our understanding of the threshold effect of advertising.

Kenji Adachi

Papers

A framework for estimating willingness-to-pay to avoid endogenous environmental risks

Economic Impact of Bovine Tuberculosis on Minnesota’s Cattle and Beef Sector

Estimating Threshold Effects of U.S. Generic Fluid Milk Advertising

Estimating Long-Run Price Relationship with Structural Change of Unknown Timing: An Application to the Japanese Pork Market

Estimating Threshold Effects of Generic Fluid Milk and Cheese Advertising