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Fast Food, Addiction, and Market Power

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

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.

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File URL: http://purl.umn.edu/7077
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Article provided by Western Agricultural Economics Association in its journal Journal of Agricultural and Resource Economics.

Volume (Year): 32 (2007)
Issue (Month): 03 (December)
Pages:

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Handle: RePEc:ags:jlaare:7077
Contact details of provider: Web page: http://waeaonline.org/
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  2. Joris Pinkse & Margaret E. Slade & Craig Brett, 2002. "Spatial Price Competition: A Semiparametric Approach," Econometrica, Econometric Society, vol. 70(3), pages 1111-1153, May.
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  13. repec:cdl:compol:217 is not listed on IDEAS
  14. J. Miguel Villas-Boas, 2006. "Dynamic Competition with Experience Goods," Journal of Economics & Management Strategy, Wiley Blackwell, vol. 15(1), pages 37-66, 03.
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