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Advertising and Retail Promotion of Washington Apples: A Structural Latent Variable Approach to Promotion Evaluation

Published online by Cambridge University Press:  28 April 2015

Timothy J. Richards ,
X.M. Gao  and
Paul M. Patterson
Timothy J. Richards
Affiliation:
Morrison School of Agribusiness and Resource Management (MSABR), Arizona State University; AT&T, Jacksonville, FL; MSABR-ASU
X.M. Gao
Affiliation:
Morrison School of Agribusiness and Resource Management (MSABR), Arizona State University; AT&T, Jacksonville, FL; MSABR-ASU
Paul M. Patterson
Affiliation:
Morrison School of Agribusiness and Resource Management (MSABR), Arizona State University; AT&T, Jacksonville, FL; MSABR-ASU
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Abstract

“Commodity promotion” consists of many activities, each designed to contribute to a consumer's product knowledge or influence tastes. However, both knowledge and tastes are unobservable, or latent, variables influencing demand. This paper specifies a dynamic structural model of fresh fruit demand that treats promotion and other socioeconomic variables as “causal” variables influencing these latent variables. Estimating this state-space model using a Kalman filter approach provides estimates of both the system parameters and a latent variable series. The results show that these latent effects contribute positively to apple and other fruit consumption, while reducing banana consumption.

Keywords

commodity promotiondemand systemDYMIMICfresh fruitKalman filterLA/AIDSlatent variables
Type
Articles
Information
Journal of Agricultural and Applied Economics , Volume 31 , Issue 1 , April 1999 , pp. 15 - 28
Copyright
Copyright © Southern Agricultural Economics Association 1999

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