CONTENTS

Dissecting the Advertising Effects on Household Milk Purchases

Director’s Column

Next Meeting

Special Cash Opportunity

NEC-63 2002 Spring Meeting March 21-22, 2002 Holiday Inn Albuquerque, New Mexico Allocation Issues in Check-off Programs

Director's Column

by Harry M. Kaiser

This issue of the Quarterly is devoted to an empirical and a methodological issue. The empirical issue involves an evaluation of the economic impact of generic fluid milk advertising in Upstate New York. Similar to other studies, the authors find that the advertising effort coordinated by national and state dairy farmer checkoff programs has a positive and statistically significant impact on fluid milk demand in New York State.

The methodological issue arises from the unique data set the authors employ. Panel data, which are data on a set of households over time, are used together with a “double hurdle” model to estimate fluid milk demand. The econometric model is unique in that it models fluid milk demand as consisting of two decision “hurdles” by the consumer. First, the consumer must decide whether or not to participate in consuming milk. Second, and contingent on the first decision, the consumer must decide how much milk to purchase. Advertising has an impact on both decisions, and hence it is interesting to employ a double hurdle model to ascertain the relative magnitude of advertising’s impact on each decision. While somewhat technical in nature, this type of model is very useful to policy makers and program managers since it gives them more detailed information on the effects of advertising on consumer decision making. The interested reader can contact the authors for a more comprehensive version of this report.