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The McDonald's Equilibrium: Advertising, Empty Calories, and the Endogenous Determination of Dietary Preferences

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  • Smith, Trenton G

Abstract

A comparison of accepted nutritional advice with actual American dietary practice suggests that many people fail to eat well in spite of well-documented health consequences. Popular culture often labels the worst offenders as lacking in “self-control,†and many blame the aggressive advertising campaigns of the fast-food and snack-food industries for manipulating consumers into poor diets, but these conclusions are not easily reconciled with a neoclassical approach to economic decision theory. This essay considers the consumer’s “diet problem†in light of emerging evidence from a number of behavioral sciences. In particular, it is argued that human evolution in the distant past resulted in an elegant solution to this problem (of search for a suitable diet in an uncertain environment), which any neoclassical economist would recognize. In modern environments, however, the signals that formerly provided information in the consumer’s search problem are subject to manipulation by food-producing firms. Confirmation by molecular biologists that many human responses to these signals are firmly encoded in our genes suggests a need to re-evaluate the welfare economics of the food industry.

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Bibliographic Info

Paper provided by Department of Economics, UC Santa Barbara in its series University of California at Santa Barbara, Economics Working Paper Series with number qt0hx9x4jr.

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Date of creation: 16 Aug 2002
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Handle: RePEc:cdl:ucsbec:qt0hx9x4jr

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Keywords: McDonald's Equilibrium; Advertising; Empty Calories; Dietary Preferences;

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References

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  1. Hirshleifer, Jack, 1973. "Where Are We in the Theory of Information?," American Economic Review, American Economic Association, vol. 63(2), pages 31-39, May.
  2. Rogers, Alan R, 1994. "Evolution of Time Preference by Natural Selection," American Economic Review, American Economic Association, vol. 84(3), pages 460-81, June.
  3. Hirshleifer, Jack, 1985. "The Expanding Domain of Economics," American Economic Review, American Economic Association, vol. 75(6), pages 53-68, December.
  4. Robson, Arthur J., 1996. "A Biological Basis for Expected and Non-expected Utility," Journal of Economic Theory, Elsevier, vol. 68(2), pages 397-424, February.
  5. Jack Hirshleifer, 1977. "Economics from a Biological Viewpoint," UCLA Economics Working Papers 087, UCLA Department of Economics.
  6. John Conlisk, 1996. "Why Bounded Rationality?," Journal of Economic Literature, American Economic Association, vol. 34(2), pages 669-700, June.
  7. Milgrom, Paul & Roberts, John, 1986. "Price and Advertising Signals of Product Quality," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 796-821, August.
  8. Smith, Trenton G, 2002. "Obesity and Nature's Thumbprint: How Modern Waistlines Can Inform Economic Theory," University of California at Santa Barbara, Economics Working Paper Series qt31g1m028, Department of Economics, UC Santa Barbara.
  9. Richard R. Nelson & Sidney G. Winter, 2002. "Evolutionary Theorizing in Economics," Journal of Economic Perspectives, American Economic Association, vol. 16(2), pages 23-46, Spring.
  10. Charles Stuart, 1981. "Consumer Protection in Markets with Informationally Weak Buyers," Bell Journal of Economics, The RAND Corporation, vol. 12(2), pages 562-573, Autumn.
  11. Klamer, Arjo, 1989. "A Conversation with Amartya Sen," Journal of Economic Perspectives, American Economic Association, vol. 3(1), pages 135-50, Winter.
  12. McCall, John J, 1970. "Economics of Information and Job Search," The Quarterly Journal of Economics, MIT Press, vol. 84(1), pages 113-26, February.
  13. Arthur J. Robson, 2002. "Evolution and Human Nature," Journal of Economic Perspectives, American Economic Association, vol. 16(2), pages 89-106, Spring.
  14. Hirshleifer, Jack, 1977. "Economics from a Biological Viewpoint," Journal of Law and Economics, University of Chicago Press, vol. 20(1), pages 1-52, April.
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Citations

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Cited by:
  1. Levy, Amnon, 2007. "A theoretical analysis of rational diet of healthy and junk foods," Economics Working Papers wp07-01, School of Economics, University of Wollongong, NSW, Australia.
  2. Trenton Smith & Hayley Chouinard & Philip Wandschneider, 2009. "Waiting for the Invisible Hand: Market Power and Endogenous Information in the Modern Market for Food," Working Papers 2009-07, School of Economic Sciences, Washington State University.
  3. Boizot-Szantai, Christine & Etile, Fabrice, 2005. "The Food Prices / Body Mass Index Relationship: Theory and Evidence from a Sample of French Adults," 2005 International Congress, August 23-27, 2005, Copenhagen, Denmark 24734, European Association of Agricultural Economists.
  4. Trenton Smith & Christiana Stoddard & Michael G. Barnes, 2007. "Why the Poor Get Fat: Weight Gain and Economic Insecurity," Working Papers 2007-16, School of Economic Sciences, Washington State University.
  5. Smith, Trenton G. & Chouinard, Hayley H. & Wandschneider, Philip R., 2011. "Waiting for the invisible hand: Novel products and the role of information in the modern market for food," Food Policy, Elsevier, vol. 36(2), pages 239-249, April.
  6. Smith, Trenton G. & Tasnadi, Attila, 2007. "A theory of natural addiction," Games and Economic Behavior, Elsevier, vol. 59(2), pages 316-344, May.
  7. Trenton G. Smith & Attila Tasnadi, 2013. "The Economics of Information, Deep Capture, and the Obesity Debate," Working Papers 1315, University of Otago, Department of Economics, revised Nov 2013.
  8. Trenton Smith, 2006. "Reconciling Psychology with Economics - Obesity, Behavioral Biology, and Rational Overeating," Working Papers 2006-4, School of Economic Sciences, Washington State University.
  9. Perez Truglia, Ricardo Nicolas, 2009. "On the genesis of Hedonic Adaptation," MPRA Paper 19929, University Library of Munich, Germany.
  10. Just, David R. & Mancino, Lisa & Wansink, Brian, 2007. "Could Behavioral Economics Help Improve Diet Quality for Nutrition Assistance Program Participants?," Economic Research Report 6391, United States Department of Agriculture, Economic Research Service.
  11. Babutsidze, Zakaria & Cowan, Robin, 2009. "Inertia, Interaction and Clustering in Demand," MERIT Working Papers 045, United Nations University - Maastricht Economic and Social Research Institute on Innovation and Technology (MERIT).
  12. Venturini, Luciano, 2006. "Food and Health: A European Perspective," Conference Papers 6684, University of Minnesota, Center for International Food and Agricultural Policy.
  13. Thunström, Linda, 2007. "The Marginal Willingness-to-Pay for Health Related Food Characteristics," UmeÃ¥ Economic Studies 724, Umeå University, Department of Economics.
  14. Berg, Nathan & Kim, Jeong-Yoo, 2010. "Demand for Self Control: A model of Consumer Response to Programs and Products that Moderate Consumption," MPRA Paper 26593, University Library of Munich, Germany.

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