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Fast Food, Addiction, and Market Power

Author

Listed:
  • Richards, Timothy J.
  • Patterson, Paul M.
  • Hamilton, Stephen F.

Abstract

Many attribute the rise in obesity since the early 1980's to the overconsumption of fast food. A dynamic model of a different-product industry equilibrium shows that a firm with market power will price below marginal cost in a steady-state equilibrium. A spatial hedonic pricing model is used to test whether fast food firms set prices in order to exploit their inherent addictiveness. The results show that firms price products dense in addictive nutrients below marginal cost, but price products high in nonaddictive nutrients higher than would be the case in perfect competition.

Suggested Citation

  • Richards, Timothy J. & Patterson, Paul M. & Hamilton, Stephen F., 2007. "Fast Food, Addiction, and Market Power," Journal of Agricultural and Resource Economics, Western Agricultural Economics Association, vol. 32(03), December.
  • Handle: RePEc:ags:jlaare:7077
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    File URL: http://purl.umn.edu/7077
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    References listed on IDEAS

    as
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