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Marketing Letters 10:2 (1999): 113124

1999 Kluwer Academic Publishers, Manufactured in The Netherlands

The Effect of Implicit versus Explicit Comparisons on


Temporal Pricing Claims
JOHN T. GOURVILLE
Harvard University, Graduate School of Business Administration, Soldiers Field, Boston, MA 02163, email:
jgourville@hbs.edu

Abstract
Existing research has investigated the pennies-a-day strategy of reframing an aggregate expense as a per
day expense (Nagle & Holden, 1995; Price 1995; Gourville 1998). This paper extends this research by
considering the incremental impact on compliance of explicitly comparing the cost of a transaction to a specific
petty cash expense (e.g., a cup of coffee). We show that in the presence of a per day framing of price (e.g., $1
per day), an explicit comparison provides little added value. However, we also show that in the presence of an
aggregate framing of price (e.g., $350), an explicit comparison to a petty cash expense is sufficient to generate
a pennies-a-day perspective. We conclude that it is not the per day framing, per se, which drives penniesa-day effectiveness, but the petty cash comparisons that such a framing either implicitly or explicitly generates.
Key words: Pennies-a-day strategy, pricing, temporal framing, consumer choice

Introduction
For the past several years, Jennifer Convertibles has been running print ads that promote
their sleeper sofas. One recent ad claims If you can afford this, and shows a
McDonalds-style lunch priced at $3.99 a day, then you can afford this and shows a
sofabed and loveseat priced at $1.68 a day. Upon reading the fine print, one finds that
the true cost of the offering is $999, payable (after finance charges) in 24 monthly
installments of $49.95 each, for an effective price of about $1.68 per day. Ads similar
in spirit have been employed by Saab, which encourages us to find our own road and
points out that we can do so either by renting a canoe for $19 a day or by leasing a Saab
automobile for $14 a day, and by Kellogg, which informs us that for less than the cost
of a postage stamp, you can address a bowl of Kelloggs Corn Flakes.
These ads employ a variation of what Gourville (1998) describes as a pennies-a-day
(PAD) pricing strategy, characterized by the reframing of a target transaction from an
aggregate expense to a per day expense (also see Nagle and Holden 1995; Price
1995). An example of such a strategy includes the charitable organization which reframes
a $100 donation as 27 a day to encourage compliance. Across several studies, Gourville (1998) finds that a per day framing systematically fosters a favorable comparison to
petty cash types of expenses and shows that such a comparison is often sufficient to
reduce the perceived cost of the target transaction.

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The Jennifer, Saab and Kellogg ads raise several interesting questions with regard to
this pennies-a-day strategy, however. First, these ads do more than just reframe an otherwise aggregate expense as a per day expense. They take the process a step further and
explicitly encourage consumers to consider a specific petty cash expense (e.g., a
McDonalds-style lunch). However, if the simple framing of a transaction as a per day
expense is sufficient to naturally foster a comparison to petty cash expenses, as suggested
by Gourville (1998), what incremental benefit is there to explicitly providing a comparison for consumers to consider?
Second, the use of a per day pricing strategy to promote items as diverse as sofas, cars
and cereals calls into questions the bounds of PAD effectiveness. Is a per day framing
sufficient to reduce the perceived cost of any product, or might PAD effectiveness be
sensitive to the characteristics of the product being promoted? We will take one cut at this
question by testing the relationship between one particular product characteristici.e., the
natural rate of product consumptionand PAD effectiveness.
In addressing these questions, this article explores how the use of either an implicit
comparison, via a simple per day price framing, or an explicit comparison can impact a
consumers perception of product affordability. In doing so, we demonstrate that it is not
the per day framing, per se, which drives PAD effectiveness, but the comparisons that
either implicitly or explicitly accompany such a framing. Finally, we show that a PAD
strategy is not universally effective, but rather, dependent upon the characteristics of the
promoted product.

1. Explaining PAD effectiveness


Research suggests that consumers routinely rely on comparisons when making many
types of consumer choice (Johnson 1984; Thaler 1985; Payne, Bettman and Johnson 1993;
Gourville 1998). In deciding whether to purchase a particular alternative within a product
category, for instance, consumers often compare that alternative to others within the same
category (see Payne, Bettman and Johnson 1993). Similarly, when deciding between
seemingly non-comparable alternatives, such as a television set and a vacation, consumers
tend to abstract upward (e.g., to overall net utility) and decide based on the comparative
benefits of one alternative over the other (Johnson 1984). More broadly, according to
Norm Theory (Kahneman & Miller 1986), when people evaluate an alternative in isolation, they often spontaneously think of other alternatives in the same category and compare the focal alternative to the generated alternatives.
Gourville (1998) builds on this comparison-based approach to decision making to
explain PAD effectiveness. Holding constant physical cash flows, he shows that subjects
are more likely to donate to a charitable cause when the donation request is framed as a
daily expense ($1 per day) as opposed to a yearly expense ($365 per year). Similarly, Price
(1995) shows that subjects are more likely to rent a $650 per month apartment over a $600
per month apartment when asked to consider the weekly price difference of $11.54 as
opposed to the yearly price difference of $600.

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To account for this effectiveness, Gourville proposes that consumers follow a two-step
decision making process of (1) comparison retrieval and (2) transaction evaluation when
assessing the expense of a target transaction. He argues that within the first step of this
process the temporal framing of price can systematically influence the nature of the
comparison expenses a consumer retrieves, with an aggregate framing fostering the
retrieval of large infrequent expenses (e.g., new suits, vacations) and a per day framing
fostering the retrieval of petty cash expenses (e.g., snacks, lottery tickets). Subsequently,
within the second step, the consumer assess the palatability of a target transaction in the
context of these retrieved expenses, with the petty cash expenses resulting from the per
day framing typically proving more palatable than the large infrequent expenses resulting
from the aggregate framing. It is important to note, however, that Gourville (1998) also
finds evidence that a per day framing can prove ineffective or even counter-effective
under certain conditions. He speculates that this ineffectiveness occurs when consumers
reject the implied petty cash comparison as appropriate for the specific target transaction.

2. Hypotheses
2.1 The role of explicit comparisons in PAD effectiveness
To date, research has investigated the effect of a simple temporal price framing (i.e.,
without an accompanying explicit comparison) on transaction compliance. This past research suggests that the framing a transaction as a per day expense implicitly promotes
comparisons to petty cash expenses. In the present research, we are interested in the
potential additional role of explicit comparisons on transaction compliance. In particular, we are interested in the following questions.
First, what role is played by an explicit comparison to a specific petty cash expense
when it accompanies an otherwise simple per day price framing, as in the case of the
Jennifer, Kelloggs and Saab ads? If a consumer is predisposed to consider petty cash
expenses in response to the per day framing, as suggested by Gourville (1998), the
provision of the explicit comparison should be redundant. Therefore, relative to an ad that
only contains a per day price framing, an ad which contains both a per day framing and
an explicit petty cash comparison should not alter compliance. We capture this thinking in
the following hypothesis:
H1: In the presence of a per day price framing, the addition of an explicit comparison
to a petty cash expense will not significantly alter transaction compliance.
Second, what is the role of an explicit comparison to a petty cash expense in the
absence of a per day price framing? Imagine a charitable request for $300. In the
absence of an explicit comparison, such a request has been shown to evoke comparisons
to large infrequent expenses and lead to relatively low transaction compliance (Gourville
1998). Now imagine the same $300 request additionally framed as less than the cost
of a years worth of morning coffees. The request is still an aggregate request for $300,

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but now with an explicit comparison to an ongoing petty cash expense. If PAD effectiveness is due to the comparisons one considers, the explicit comparison to a years worth of
morning coffees may be sufficient to impact compliance, in spite of the otherwise aggregate framing of price. This is reflected in the following hypothesis:
H2: In the absence of a per day price framing, an explicit comparison to a petty cash
expense will impact compliance as if a per day framing had been provided.
Taken together, these hypotheses suggest that either a per day price framing or an
explicit comparison is sufficient to foster a petty cash perspective. More generally, they
suggest that it is not the per day framing, per se, which drives PAD effectiveness, but the
petty cash comparisons that either implicitly or explicitly accompany such a framing.

2.2 The impact of product characteristics on PAD effectiveness


A PAD strategy has been shown effective for products ranging from phone service to
apartment rent to charitable donations (Price 1995; Gourville 1998). In addition, the ads
of Jennifer, Saab and Kellogg reflect an expectation that such as strategy will also be
effective for furniture, automobiles and breakfast cereals. In light of these diverse applications, one can ask if a per day pricing strategy is sufficient to reduce the perceived cost
of any and all products? Or, is the effectiveness of such a strategy sensitive to the
characteristics of the product being promoted?
Based on the assimilation and contrast literature (Schwarz and Bless 1992), we should
expect bounds to PAD effectiveness. Specifically, a PAD strategy should be effective when
the target transaction is viewed as similar to or assimilated with a petty cash expense.
Alternatively, a PAD strategy should be ineffective or even counter-effective when the
target transaction is rejected as or contrasted with a petty cash expense. The categorization research suggests that one basis for this assimilation or contrast is the perceived overlap between the target transaction and the petty cash expenses that are retrieved
(Rosch and Mervis 1975; Tversky 1977).
With this in mind, and with the goal of demonstrating some limits to PAD effectiveness,
we chose one salient product characteristic which we expected to impact the perceived
overlap between a PAD-framed target transaction and prototypical petty cash expenses
i.e., the rate at which a product is consumed. We expected high perceived overlap for a
product consumed on a continuous or ongoing basis (e.g., telephone service), but we
expect low perceived overlap for a product consumed all-at-once, in a lump sum manner
(e.g., a restaurant dinner). As a result, we expected assimilation and subsequent PAD
effectiveness for an ongoing consumption product, but contrast and PAD ineffectiveness
(or counter-effectiveness) for a lump sum consumption product. This leads to the following hypothesis:
H3: Relative to an aggregate framing, a per day framing will lead to higher compliance for a product consumed on an ongoing basis than on a lump sum basis.

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3. Study purpose and design


To test our hypotheses, a target ad was developed in which rate of product consumption
(ongoing vs. lump sum), temporal frame of price (per day vs. aggregate) and comparison type (no explicit comparison vs. explicit comparison) were manipulated across
subjects. Each subject saw one version of this ad and was asked to evaluate the product
offering on a variety of perceived value measuresmeasures shown to correlate with
eventual transaction compliance (Dodds, Monroe and Grewal 1991; Grewal, Monroe and
Krisnan 1998). These manipulations and measures allowed us to test our three hypotheses.

3.1 Method
Subjects. Subjects for this study were 128 students at University of Chicago who were the
recruited via flyers posted on campus and who were paid five dollars for their participation.
Stimuli. This study consisted of two questionnaires filled out in sequence. The first
questionnaire presented a series of print ads which subjects were asked to evaluate on the
five perceived value dimensions. The second questionnaire asked subjects to assess their
rate of consumption for the advertised products as well as their familiarity with and
opinions about those products.
Questionnaire 1. The first questionnaire consisted of eight print ads that subjects were
told were mock-ups of actual magazine ads. Each showed a product being offered, some
details about that product and a specific pricing claim. All but one of the ads were filler
ads and were identical across subjects. The remaining ad was the target ad and was
manipulated across subjects. To eliminate order effects, this target ad was always the
fourth ad presented and was always preceded by the same filler ad.
Following each of the eight ads, subjects answered five questions about how good a
value they perceived the particular product offering to be. These five perceived value
questions were: (1) How attractive do you find this particular deal?, (2) Does this product
offering represent a poor value or a good value for the money?, (3) How affordable is the
product being offered?, (4) How seriously would you consider this particular brand?, and
(5) Do you think this ad will be effective at improving sales for this product?. Subjects
responded on 9-point Likert scales. Upon completion, subjects returned this first questionnaire and were given the second.
Questionnaire 2. The second questionnaire asked four questions about each of the products presented in Questionnaire 1. Subjects were shown each of the eight ads again and
were asked (1) Do people tend to consume the advertised product on a lump sum or an
ongoing basis?, (2) How familiar are you with prices in the advertised product category?,
(3) How familiar are you with the advertised brand? and (4) How favorable an impression
do you have of the advertised brand?. Subjects responded to all four questions on 9-point

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Likert scales. Question 1 was included as a manipulation check, while Questions 2, 3 and
4 were included as potential covariates.1

3.2 Experimental design


Each subject was randomly assigned to one of sixteen conditions, formed by manipulating
the target ad on four factors (refer to Table 1 for the factors and Figure 1 for a sample of
the ads).2 The first factor was the rate of consumption of the advertised product (Consumption Rate). Subjects either saw an ad for a product typically consumed on an ongoing
basis (Ongoing Consumption) or for a product typically consumed on a lump sum basis
(Lump Sum Consumption).
The second factor was the specific product advertised (Product), which was nested
within the first factor, Consumption Rate. Specifically, for robustness, two products of
each consumption rate were included in this study. Subjects in the Ongoing Consumption
condition either saw an ad for a years worth of cellular telephone service (Cellular; Total
Price $350) or an annual health club membership (Gym; $300). Subjects in the Lump
Sum Consumption condition either saw an ad for a round-trip airline ticket (Plane; $319)
or an all-inclusive weekend stay at a country inn (Inn; $329). In choosing these products,
an attempt was made to matched them on price ($300$350), on their discretionary nature
and in the fact they were service-based.
The third factor was the temporal frame of the pricing claim (Frame). Prices were
presented as either a per day price (PAD) or an aggregate price (Aggregate). For
instance, some Cellular telephone ads in the PAD condition read For Only 95 a Day,
Never Be Un-Reachable!, while similar ads in the Aggregate condition read For Only
$350 a Year, Never Be Un-Reachable!.
The fourth factor was whether or not an explicit comparison was provided (Explicit
Comparison). For half the ads, no explicit comparison was provided (No Comparison).
For the other half of the ads, the price of the target product was explicitly compared to the
cost of a petty cash expense (Comparison), such as ones morning coffee.3 For example,
the Comparison ads for Cellular telephones read, For the Cost of Your Morning Coffee,
Never Be Un-Reachable. The PAD framing showed one cup of coffee priced at 95 a
Day. The Aggregate framing showed many cups of coffee priced at $350 a Year.
As shown in Table 1, these four factors formed a between subjects design in which four
levels of Product were nested within two levels of Consumption Rate, which were
then fully crossed with two levels of Frame and two levels of Explicit Comparison.
Product was treated as a random factor and all other factors were treated as fixed
factors.

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4. Results
4.1 Manipulation check
Hypothesis 3 of this study involved the difference in PAD effectiveness across products
consumed on an ongoing basis versus a lump sum basis. Thus, it was important to
establish that the target stimuli were perceived as intended. In Questionnaire 2, each
subject was asked to rate the consumption pattern of the target product on a 9-point Likert
scale (1Lump Sum, 9Ongoing). Using these ratings as the dependent variable, a 2
(Consumption Rate) x 2(2) (Product nested within Consumption Rate) ANOVA was
conducted, revealing the intended main effect for Consumption Rate (F(1,2) 2131.60,
p .0005) and the intended lack of effect for Product (F 1). Subjects mean ratings
were significantly higher for the two Ongoing Consumption products (Xcellular 6.8;
Xgym 6.9) than they were for the two Lump Sum Consumption products (Xplane 2.4;
Xinn 2.2). This result suggests that Consumption Rate was successfully manipulated.

4.2 PAD compliance


In Hypothesis 3, we predicted that a PAD framing would lead to higher compliance,
relative to an Aggregate framing, for Ongoing as opposed to Lump Sum Consumption
products. To test this prediction, subjects responses to the five perceived value ques-

Figure 1. Examples of cellular telephone ads used in experiment.

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Table 1. Mean Perceived Value scores by Consumption Rate, Product, Temporal Frame and existence of
Explicit Comparison.
Consumption Rate:

Ongoing

Product:

Cellular

Temporal Frame:
Explicit Comparison:
a
b

No:
Yes:

PAD

Aggr.

6.63b
5.83

4.45
5.68

Lump Sum
Gym

Plane

Country Inn

PAD

Aggr.

PAD

Aggr.

PAD

Aggr.

5.85
5.95

4.83
6.33

3.68
5.50

6.30
5.35

3.28
4.25

6.30
4.20

Aggr. Aggregate.
Number of subjects in each of 16 conditions 8.

tions were averaged into a single Perceived Value score (Cronbachs Alpha .89), with
higher scores indicating a better value than lower scores. Mean Perceived Value scores
across all subjects are shown in Table 1.
These scores were analyzed in a 2 (Consumption Rate) x 2(2) (Product nested within
Consumption Rate) x 2 (Frame) x 2 (Explicit Comparison) ANOVA. In this ANOVA,
Product (nested within Consumption Rate) was not significant as either a main effect
(F(2,112) 1.51, p .20) or in any higher order interaction (all ps .35).
Consistent with Hypothesis 3, the ANOVA revealed a significant Consumption Rate x
Frame interaction (F(1,2) 23.23, p .05). For the Ongoing Consumption products,
subjects mean Perceived Value scores were higher under the PAD framings than under the
Aggregate framings (XOngoing/PAD 6.06 vs. XOngoing/Aggr. 5.32). But for the Lump
Sum Consumption products, they were lower under the PAD than under the Aggregate
framings (XLump/PAD 4.18 vs. XLump/Aggr. 5.54).
This two-way interaction, however, was qualified by a significant three-way interaction
of Consumption Rate x Frame x Explicit Comparison (F(1,2) 178.99, p .01), as
shown in Figure 2. In the No Comparison condition, the differential effects of temporal
framing were quite pronounced. For the Ongoing Consumption products, subjects mean
Perceived Value scores were significantly higher under the PAD than under the Aggregate
framing (XOngoing/PAD/NoComp 6.24 vs. XOngoing/Aggr./NoComp 4.64; F(1,2) 85.22, p
.05). For the Lump Sum Consumption products, they were significantly lower under the
PAD framing (XLump/PAD/NoComp 3.48 vs. XLump/Aggr./NoComp 6.30; F(1,2) 265.67,
p .005). As per a planned contrast, this interaction was significant (F(1,2) 325.92, p
.005).
However, in contrast to the strong effects observed under the No Comparison conditions, the differential effect of temporal framing on Perceived Value disappeared when
comparisons were provided. In the Comparison condition, Perceived Value scores were
virtually identical under the PAD and Aggregate framings for both the Ongoing (XOngoing/
PAD/Comp 5.89 vs. XOngoing/Aggr./Comp 6.00; F 1) and the Lump Sum Consumption
products (XLump/PAD/Comp 4.88 vs. XLump/Aggr./Comp 4.78; F 1). These effects of
explicit comparisons are reviewed in detail below.

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Figure 2. Relative effects of Temporal Frame on Perceived Value.

4.3 Effects of explicit comparisons


In Hypothesis 1, we predicted that in the presence of a per day price framing, the
provision of an explicit petty cash comparison would be redundant. As shown by the
solid lines in Figure 3, this hypothesis held for the Ongoing Consumption products but
failed for the Lump Sum Consumption products. For the Ongoing Consumption products,

Figure 3. Relative effects of Explicit Comparison on Perceived Value.

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the addition of an explicit comparison did not significantly alter subjects Perceived Value
scores relative to when no explicit comparison was provided (XOngoing/PAD/NoComp 6.24
vs. XOngoing/PAD/Comp 5.89; F(1,2) 4.08, p .15). But for the Lump Sum Consumption products, subjects Perceived Value scores significantly increased when an explicit
petty cash comparison was provided (XLump/PAD/NoComp 3.48 vs. XLump/PAD/Comp
4.88; F(1,2) 65.25, p .05).
Thus, for the Ongoing Consumption productsproducts for which a PAD-framing was
expected to generate an acceptable comparison to prototypical petty cash expensesit
appears that the addition of an explicit petty cash comparison truly was redundant. However, for the Lump Sum Consumption productsproducts for which a PAD-framing was
expected to generate an unacceptable comparison to prototypical petty cash expenses
the addition of an explicit comparison did provide some incremental value. This result
deserves attention in future research.
In Hypothesis 2, we predicted that in the absence of a per day framing (i.e., in the
presence of an aggregate framing), an explicit comparison would impact compliance as
if a per day framing had been provided. As shown by the dashed lines in Figure 3, this
hypothesis held both for the Ongoing Consumption products, where the addition of the
explicit comparison significantly increased subjects Perceived Value scores (XOngoing/
Aggr./NoComp 4.64 vs. XOngoing/Aggr./Comp 6.00; F(1,2) 61.80, p .02), and for the
Lump Sum Consumption products, where the explicit comparison significantly decreased
subjects Perceived Value scores XLump/Aggr./NoComp 6.30 vs. XLump/Aggr./Comp 4.78;
F(1,2) 77.42, p .02).
Thus, in support of Hypothesis 2, it appears that the provision of an explicit comparison
to a petty cash expense was sufficient to foster a petty cash perspective for both
Ongoing and Lump Sum Consumption products.

5. Conclusions and limitations


There are two main findings from this research. First, it appears that a pennies-a-day
strategy is bounded by the characteristics of the product being promoted. For products
consumed on an ongoing basis, a per day framing resulted in significantly higher compliance (as measured by perceived value) than an aggregate framing. However, for
products consumed in a lump sum manner, a per day framing backfired, resulting in
lower compliance. Combined with previous findings of a monetary threshold for PAD
effectiveness (Gourville 1998), this finding begins to place bounds on the types of products which will benefit from a per day pricing strategy. Moving forward, we would
encourage others to further explore the nuances of PAD effectiveness.
Second, this research sheds light on the effect of an explicit comparison on transaction
compliance. As expected, in the presence of a per day price framing, the use of an
explicit comparison (e.g., ones morning coffee) proved redundant for ongoing consumption products. Presumably, the simple per day framing was sufficient to promote the
consideration and acceptance of petty cash expenses. As such, the explicit petty cash
comparison added nothing to the equation. Contrary to expectations, however, the addition

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of an explicit comparison to an ad which already contained a per day framing did prove
beneficial for lump sum consumption products. This unexpected result in intriguing and
deserves further attention. Perhaps the use of an explicit comparison provides some
credibility to an otherwise unacceptable per day price framing. And finally, in the presence of an aggregate framing, the use of an explicit petty cash comparison (e.g., a years
worth of morning coffees) was shown to induce a PAD perspective. This result is interesting in that these ads clearly presented the total cost of the transaction, yet still influenced compliance by manipulating the types of comparable expenses subjects considered.
As for limitations to this research, we should note a potential confound in the current
research.4 While care was taken to match the Ongoing and Lump Sum Consumption
products on a variety of dimensions (e.g., price, service-based), these products may have
varied systematically on other important dimensions. For instance, cellular service and
health club membership may have been viewed as utilitarian goods while airline travel and
weekend vacations may have been viewed as luxury goods. This potential confound
should be controlled for in future research.
In conclusion, the present research lends support to the claim that consumers follow a
comparison-based decision making process when evaluating temporally framed product
offerings. In particular, the current research shows that either an implicit comparison, via
a simple per day price framing, or an explicit petty cash comparison can induce a PAD
perspective and impact a consumers perception of product affordability. In doing so, we
conclude that a simple per day framing is neither necessary nor sufficient to positively
impact consumer choice. Rather, an explicit petty cash comparison can be as impactful as
a per day framing at influencing compliance, while the valence of that influence will
depend upon the consumption characteristics of the product being promoted.

Acknowledgments
The author thanks John Deighton, Steve Hoch, Editor Robert Meyer and an anonymous
reviewer for their constructive comments on this paper.

Notes
1. None of these potential covariates had any significant effects and, therefore, are excluded from the analyses
reported.
2. A complete set of the target stimuli are available from the author upon request.
3. For subjects in the Comparison conditions, two petty cash comparisons were employedones morning
coffee or an afternoon snack drink. The specific petty cash comparison employed did not prove to be
significant in any of the analyses conducted (all ps .15). Therefore, all data were collapsed across the
coffee and snack drink comparisons in the analyses reported.
4. We thank a reviewer for raising this issue.

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Kluwer Journal
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COMPOSED: 01/11/99 2:47 pm.

PG.POS. 12

SESSION: 5

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