Dynamic Model of Fresh Fruit Promotion: A Household Production Approach

Many studies consider the dynamic effects of commodity promotion on demand, but few derive the theoretical basis for these effects in a model of optimal consumer behavior. This study develops a dynamic household production model of U.S. fresh fruit consumption, which it uses to evaluate the effectiveness of advertising and promotion expenditures by the Washington Apple Commission. Estimates from a dynamic‐dual Generalized Leontief system show direct advertising to be marginally more effective than retail promotion in increasing apple sales, but advertising has positive spillover effects to sales of other fruits, whereas promotion reduces sales of competing products.