Do Agricultural Marketing Cooperatives Advertise Less Intensively Than Investor-Owned Food-Processing Firms?

Jennifer E. Gruber, Richard T. Rogers and Richard J. Sexton

Journal of Cooperatives, 2000, vol. 15, 16

Abstract: A common belief is that agricultural marketing cooperatives advertise less than their investor-owned counterparts, holding other factors constant. This paper presents both a conceptual and an empirical analysis that questions this conventional wisdom. Our conceptual model analyzes a cooperative’s optimal advertising-to-sales (A/S) ratio under three alternative objective functions. In each instance, the optimal A/S ratio is characterized by the well-known Dorfman-Steiner condition that also characterizes optimal advertising for an investor-owned firm. The empirical analysis examines forty-nine processed food markets, each containing at least one cooperative. The results do no support the conventional wisdom that cooperatives advertise less, ceteris paribus. The appearance that cooperatives advertise less is due to their predominance in industries with low margins and little product differentiation, factors that are associated with low advertising intensity regardless of a firm’s organizational form.

Keywords: Agribusiness (search for similar items in EconPapers)
Date: 2000
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Citations: View citations in EconPapers (6)

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Persistent link: https://EconPapers.repec.org/RePEc:ags:jlcoop:46410

DOI: 10.22004/ag.econ.46410

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