The Impact of Mandatory Disclosure Laws on Product Choices: An Analysis of the Salad Dressing Market
The Nutrition Labeling and Education Act (NLEA) requires most food products to include a nutrition label. Prior to the NLEA, labeling was voluntary. This study uses nutrition label information and supermarket scanner data pre- and post-NLEA to examine the impact of moving from a voluntary to a mandatory labeling regime on consumer product choice. The voluntary unraveling of information is shown to be an important market mechanism. Prior to the NLEA, all low-fat salad dressings had a nutrition label, while the majority of the higher fat dressings did not. However, there remained large variation in fat content among dressings that did not voluntarily label. Those with the highest fat levels experienced a significant decline in sales after they were required to disclose. The results indicate that even in markets with credible, low-cost mechanisms to disclose, mandatory labeling can have an impact on consumer behavior and health. Copyright 2000 by the University of Chicago.
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