McImpact: Welfare Impacts of All Day Breakfast after HPAI Outbreak

Beginning October 2015, McDonalds restaurants offer a limited breakfast menu all day in hopes of catalyzing business growth in the United States. The decision to expand the menu comes at a time when key breakfast menu inputs, i.e. eggs, are in shortage due to the outbreak of highly pathogenic avian influenza (HPAI) in U.S. layer flocks. The first case of HPAI was announced December 2014 with the last reported detection occurring June 2015 affecting more than 48 million birds. The outbreak led to depopulation of millions of infected birds, limiting supply, which has led to higher retail prices to consumers both direct and indirect consumption. The increase in demand by McDonalds is expected to further exacerbate this issue. Using a partial equilibrium model of U.S. layer flocks, the welfare impacts of an increase in demand coupled with a decrease in supply can be estimated. By using HPAI outbreak supply shocks and a stochastic estimation of demand increases due to all day breakfast by McDonald’s, the total welfare are estimated to have an additional negative $220 thousand marginal impact to consumers and a positive $33 thousand impact to producers.