THE EFFECTS OF ADVERTISING ON MILK DEMAND ELASTICITIES AND STRUCTURAL CHANGES IN KOREAN MILK MARKETS

This paper examines the effectiveness of generic commodity promotion program based on checkoff funds by estimating the demand elasticities of advertisement. Focusing on a possible structural change in terms of advertisement strategies, we model econometrically the effects of generic advertising on milk demand in Korean milk. Econometric results show significant differences in the effects of advertising on milk demand depending on whether the market is mainly characterized by either brand or generic advertisement (the generic advertising regime versus the brand advertising regime). The demand elasticity of advertisement is estimated to be smaller in the brand advertising regime than the generic advertising regime. This suggests a positive impact of generic commodity promotion program in Korean milk market. In addition, we found evidence that milk imports play an important role in characterizing two different regimes: a structural shift occurs when the imported amount of milk is significant.