The Got Milk? Advertisement campaign is run by the National Fluid Milk Producers, an industry group that is funded by a tax of $0.20 per hundredweight of processed milk. Milk producers pool their resources and run a generic (non-brand) advertising campaign. Why?
Milk is a standardized good, so advertising by one producer increases demand and benefits other producers. The Got Milk? Campaign increases the demand for milk by about 6 percent, and the bang per buck (the increase in milk sales per dollar on advertising) is about $5. No single firm has an incentive to incur the cost of an advertising campaign, because the firm bears all the cost but experiences only a fraction of the benefits. The result is an advertiser’s dilemma: All firms would benefit from an advertising campaign, but no single firm has an incentive to pay for a campaign. The solution to this advertiser’s dilemma is to share the cost of an advertising campaign, along with the benefits.