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Information Cost and Consumer Choices of Healthy Foods

Listed author(s):
  • Chen Zhu
  • Rigoberto A. Lopez
  • Xiaoou Liu

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.

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File URL: http://hdl.handle.net/10.1093/ajae/aav057
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Article provided by Agricultural and Applied Economics Association in its journal American Journal of Agricultural Economics.

Volume (Year): 98 (2016)
Issue (Month): 1 ()
Pages: 41-53

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Handle: RePEc:oup:ajagec:v:98:y:2016:i:1:p:41-53.
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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.
  2. Hausman, Jerry A & Wise, David A, 1978. "A Conditional Probit Model for Qualitative Choice: Discrete Decisions Recognizing Interdependence and Heterogeneous Preferences," Econometrica, Econometric Society, vol. 46(2), pages 403-426, March.
  3. Train,Kenneth E., 2009. "Discrete Choice Methods with Simulation," Cambridge Books, Cambridge University Press, number 9780521766555, March.
  4. Nevo, Aviv, 2001. "Measuring Market Power in the Ready-to-Eat Cereal Industry," Econometrica, Econometric Society, vol. 69(2), pages 307-342, March.
  5. Heckman, James J, 1978. "Dummy Endogenous Variables in a Simultaneous Equation System," Econometrica, Econometric Society, vol. 46(4), pages 931-959, July.
  6. Berning Joshua P & Chouinard Hayley H & McCluskey Jill J, 2008. "Consumer Preferences for Detailed versus Summary Formats of Nutrition Information on Grocery Store Shelf Labels," Journal of Agricultural & Food Industrial Organization, De Gruyter, vol. 6(1), pages 1-22, August.
  7. Wansink, Brian & Sonka, Steven T. & Hasler, Clare M., 2004. "Front-label health claims: when less is more," Food Policy, Elsevier, vol. 29(6), pages 659-667, December.
  8. A. Colin Cameron & Pravin K. Trivedi, 2010. "Microeconometrics Using Stata, Revised Edition," Stata Press books, StataCorp LP, number musr, January.
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