Measures of precision for estimated welfare effects for producers from generic advertising

Using a multi-market equilibrium displacement model (EDM) framework, the precision of market parameters (elasticities) measured using econometric methods, can be combined with prior beliefs from economic theory, to calculate how precisely changes in producer welfare from generic advertising are estimated. This EDM approach enables the benefits and costs of simulated small changes in the checkoffs and advertising on producer welfare to be measured. To calculate the associated precision for changes in producer welfare measures, Monte Carlo integration is used, in a Bayesian approach, imposing inequality restrictions from theory, to generate empirical posterior distributions of the changes in producer welfare measures. These empirical distributions can be used to place confidence intervals around the posterior means and to test whether estimates are statistically significantly different from zero. Alternatively, the probability that a welfare measure change is greater than zero can be calculated, which may serve to even be more informative. [EconLit citations: C130; C110; C150]. © 2003 Wiley Periodicals, Inc. Agribusiness 19: 379-391, 2003.