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Rational inattention or rational overreaction? Consumer reactions to health news

Author

Listed:
  • Martin Browning

    (Dept. of Economics, University of Oxford)

  • Lars Gårn Hansen

    (Department of Food and Resource Economics, University of Copenhagen)

  • Sinne Smed

    (Department of Food and Resource Economics, University of Copenhagen)

Abstract

We investigate differences in how consumers of fish react to media information about long term health effects of eating fish. We specify a dynamic empirical model that allows for heterogeneity in all basic parameters of consumer behavior as well as in how consumers react to information. We estimate the model using a unique household panel tracking consumption, prices, news stories and media habits over 24 quarters. Prior studies find/suggest that the consumers most likely to be rationally ignorant of long term health effects are inattentive to health news. In contrast we find that these consumers react more dramatically to health news than the consumers who most likely are well informed.

Suggested Citation

  • Martin Browning & Lars Gårn Hansen & Sinne Smed, 2013. "Rational inattention or rational overreaction? Consumer reactions to health news," IFRO Working Paper 2013/14, University of Copenhagen, Department of Food and Resource Economics.
    • Handle: RePEc:foi:wpaper:2013_14
    as

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    File URL: http://okonomi.foi.dk/workingpapers/WPpdf/WP2013/IFRO_WP_2013_14.pdf
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    References listed on IDEAS

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    More about this item

    Keywords

    health information; consumer behaviour; pervasive heterogeneity;
    All these keywords.

    JEL classification:

    • D1 - Microeconomics - - Household Behavior
    • C5 - Mathematical and Quantitative Methods - - Econometric Modeling

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