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Information Cost and Consumer Choices of Healthy Foods

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  • Chen Zhu
  • Rigoberto A. Lopez
  • Xiaoou Liu

Abstract

This article examines whether or not a reduction in consumer search cost for nutritional information increases the probability that heterogeneous consumers will choose healthier food products. Empirical results from the ready-to-eat breakfast cereal (RTEC) market confirm the conceptual analysis that lowering information cost via simplified nutritional labeling increases the healthfulness of consumer choices. The healthfulness attribute weighs 28.44% more heavily in consumers' decision-making with simpler labeling systems. On average, introducing front-of-package labeling increased the probability of a consumer choosing a healthy RTEC by 3.49% and reduced the probability of choosing an unhealthy RTEC by 3.81%. Calories, sugar, saturated fat, and sodium consumption decrease by 0.31%, 2.63%, 6.94%, and 1.97%, respectively. Fiber intake increases by 3.24%. Further results show that less-educated and smaller households with less frequent purchases benefit the most from a reduction in information cost. Overall, this article shows the potentially positive role that voluntary, more convenient labeling could play in improving market and public health outcomes.

Suggested Citation

  • Chen Zhu & Rigoberto A. Lopez & Xiaoou Liu, 2016. "Information Cost and Consumer Choices of Healthy Foods," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 98(1), pages 41-53.
  • Handle: RePEc:oup:ajagec:v:98:y:2016:i:1:p:41-53.
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    File URL: http://hdl.handle.net/10.1093/ajae/aav057
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    1. Zhu, Chen & Huang, Rui, 2014. "Heterogeneity in Consumer Responses to Front-of-Package Nutrition Labels: Evidence from a Natural Experiment?," Working Papers 27, University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy.
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    11. Nevo, Aviv, 2001. "Measuring Market Power in the Ready-to-Eat Cereal Industry," Econometrica, Econometric Society, pages 307-342.
    12. Heckman, James J, 1978. "Dummy Endogenous Variables in a Simultaneous Equation System," Econometrica, Econometric Society, pages 931-959.
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