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Abstract

Increased demand for an advertised product may increase price, which, in turn, may lead to a free rider problem where competitive imports increase and result in a smaller price increase than otherwise. A study of Florida Department of Citrus advertising for orange juice indicated that the free rider problem has notably limited the impact of advertising on price in the U.S. market. High U.S. orange juice demand, which in part has been a result of advertising, has attracted substantial amounts of orange juice imports. Imports have eroded the impact of advertising on price by an estimated two-thirds.

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