DOES BRANDED FOOD PRODUCT ADVERTISING HELP OR HURT FARMERS?

This study investigates market conditions when food processor/handler brand advertising, whether undertaken by an investor-owned firm or by a cooperative, will benefit or harm farmers. Addressing this question provides insight into the policy issue of whether and when promotion funds intended to benefit farmers should be used in support of brand advertising. Analysis of a two-stage oligopoly-oligopsony model shows that advertising by an investor-owned firm is most likely to be harmful to farmers when it takes place in a relatively unconcentrated industry and when advertising is relatively more effective at creating brand market power than at increasing total demand.