Advertising with Supply Control: Some Implications of Norwegian Whitefish Export Promotion

Abstract

An issue for generic advertising in agricultural markets with unregulated supplies is that the promotion-induced demand shift could lead to a supply response that substantially attenuates the price effects of the promotion. For the generic promotion of fish exports, however, the concern is generally just the opposite—the possibility that extensive government supply controls could render promotion efforts to expand export sales ineffectual due to little or no supply response. This study considers the effects of government whitefish (cod, haddock, and others) supply controls on the effectiveness of the Norwegian Seafood Council (NSC) whitefish export promotion program. We use an econometric simulation model to measure the effectiveness and returns to NSC whitefish export promotion under a range of possible export supply control conditions. Results indicate that effective supply control maximizes the return to promotion and that ineffectual supply control imposes a potentially large opportunity cost on the promoting industry.

The apparent conflict of Norwegian pelagic fisheries management and Norwegian seafood council export promotion

“…7 Comparison BCRs could be calculated based on the simulation results using the comparison export supply elasticities. Such ex-post calculations would assume that the expenditure levels (E j ) used in the denominator of each BCR calculated is historically fixed (exogenous) and, therefore, would not change given changes in the export supply elasticity (Williams and Capps, 2020a). If this paper was concerned with calculating the optimal expenditure levels, the export supply elasticity assumed would have no effects on the BCR calculations (Kinnucan and Myrland, 2000).…”

A welfare analysis of Norway’s export promotion programme for whitefish

“…Second, it provides an estimate of consumer benefits and costs of the program and the optimal levy. Previous research estimates the producer impact of Norwegian export promotion of whitefish (Williams and Capps, 2020), but does not address the levy rate that would maximize producer gains, or the impact of the program on consumers. The consumer impact is of interest because it provides a more complete picture of the promotion program from a social welfare perspective (Wohlgenant, 1993;Zhao et al, 2003).…”

“…This provides a natural setting to discuss the role of levy shifting in the distribution, or incidence, of the cost and benefits of generic advertising programs. Some 95% of Norway's whitefish on average is exported (Williams and Capps, 2020). Thus, the domestic market can be safely ignored, which simplifies the analysis.…”

“…Thus, the domestic market can be safely ignored, which simplifies the analysis. The parameters needed for welfare analysis have been estimated in a recent study by Williams and Capps (2020). This obviates the need for econometric analysis, though some is done to provide a basis for sensitivity analysis.…”

“…Consequently, there is some interest in knowing whether the increased levy cum advertising is remunerative from the producer perspective. In addition to considering explicitly the effect of the increased levy on producer welfare, this study differs from the analysis of Williams and Capps (2020) by i) considering the effect of the intensified program on consumer welfare; ii) taking into account the effect of levy shifting on the estimated BCR; iii) comparing the current levy of 0.75% to the optimal levy as developed by Kinnucan and Myrland (2000); and iv) showing that the BCR can be approximated using strictly demand-side information.…”