The Procompetitive Effect of Demand‐Enhancing Check‐Off Programs

This article explores demand‐enhancing check‐off programs and how such programs may influence both private programs as well as industry market structure. Under duopoly, a firm may increase its sales through privately funding product quality improvements. However, such endogenous sunk costs may also be used to exclude a rival. Industry‐funded check‐off programs affect firms’ strategies and can be procompetitive. The rationale lies not only in how the check‐off enhancement is perceived by consumers but also in the way the check‐off's crowding‐out effect reduces the ability of a firm to use its private expenditures to bar a rival's market access.