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The Economics of Information, Deep Capture, and the Obesity Debate

Listed author(s):
  • Trenton G. Smith

    ()

    (Department of Economics, University of Otago, New Zealand)

  • Attila Tasnadi

    ()

    (Corvinus University of Budapest)

The economic theory of regulatory capture predicts that industry groups will attempt to influence their regulators (for example, by lobbying for rules that exclude competition). It has been suggested that the same logic applies to any powerful institution with the ability to affect industry profits. When the aim of industry is to alter the public's perception of its product (for example, by disseminating favorable messages to the news media or via an advertising campaign, or by funding industry-friendly scientific research), the end result has been dubbed deep capture. We develop a formal model of deep capture, in which consumers have imperfect information about product quality, and a dominant producer is able to increase his profits by altering the parameters of the consumer's search problem. We demonstrate the empirical relevance of the phenomenon with a discussion of the food industry response to the obesity epidemic.

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File URL: http://www.otago.ac.nz/economics/otago111194.pdf
File Function: First version, 2013
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Paper provided by University of Otago, Department of Economics in its series Working Papers with number 1315.

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Length: 19 pages
Date of creation: Nov 2013
Date of revision: Nov 2013
Handle: RePEc:otg:wpaper:1315
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  1. Cawley, John & Frisvold, David & Meyerhoefer, Chad, 2013. "The impact of physical education on obesity among elementary school children," Journal of Health Economics, Elsevier, vol. 32(4), pages 743-755.
  2. Andrew Stivers, 2009. "Regulating Market Language: Market Failure in Descriptive Signals," Journal of Consumer Policy, Springer, vol. 32(1), pages 23-41, March.
  3. Trenton G. Smith, 2012. "Obesity and the Economics of Prevention: Fit Not Fat," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 94(3), pages 815-817.
  4. Smith, Trenton G. & Chouinard, Hayley H. & Wandschneider, Philip R., 2011. "Waiting for the invisible hand: Novel products and the role of information in the modern market for food," Food Policy, Elsevier, vol. 36(2), pages 239-249, April.
  5. N/A, 2009. "contributors," Politics, Philosophy & Economics, , vol. 8(1), pages 131-131, February.
  6. Eid, Jean & Overman, Henry G. & Puga, Diego & Turner, Matthew A., 2008. "Fat city: Questioning the relationship between urban sprawl and obesity," Journal of Urban Economics, Elsevier, vol. 63(2), pages 385-404, March.
  7. John Cawley & Chad Meyerhoefer & David Newhouse, 2007. "The impact of state physical education requirements on youth physical activity and overweight," Health Economics, John Wiley & Sons, Ltd., vol. 16(12), pages 1287-1301.
  8. Chou, Shin-Yi & Grossman, Michael & Saffer, Henry, 2004. "An economic analysis of adult obesity: results from the Behavioral Risk Factor Surveillance System," Journal of Health Economics, Elsevier, vol. 23(3), pages 565-587, May.
  9. Trenton G. Smith, 2004. "The McDonald’s Equilibrium. Advertising, empty calories, and the endogenous determination of dietary preferences," Social Choice and Welfare, Springer;The Society for Social Choice and Welfare, vol. 23(3), pages 383-413, December.
  10. Smith, Trenton G. & Tasnadi, Attila, 2007. "A theory of natural addiction," Games and Economic Behavior, Elsevier, vol. 59(2), pages 316-344, May.
  11. Weitzman, Martin L, 1979. "Optimal Search for the Best Alternative," Econometrica, Econometric Society, vol. 47(3), pages 641-654, May.
  12. Jean-Jacques Laffont & Jean Tirole, 1993. "A Theory of Incentives in Procurement and Regulation," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262121743, January.
  13. Darby, Michael R & Karni, Edi, 1973. "Free Competition and the Optimal Amount of Fraud," Journal of Law and Economics, University of Chicago Press, vol. 16(1), pages 67-88, April.
  14. N/A, 2009. "contributors," Politics, Philosophy & Economics, , vol. 8(2), pages 243-243, June.
  15. Roe, Brian E. & Teisl, Mario F., 1998. "The Economics Of Labeling: An Overview Of Issues For Health And Environmental Disclosure," Agricultural and Resource Economics Review, Northeastern Agricultural and Resource Economics Association, vol. 27(2), October.
  16. N/A, 2009. "contributors," Politics, Philosophy & Economics, , vol. 8(3), pages 351-352, August.
  17. Wim Verbeke, 2005. "Agriculture and the food industry in the information age," European Review of Agricultural Economics, Foundation for the European Review of Agricultural Economics, vol. 32(3), pages 347-368, September.
  18. Tirole, Jean, 1986. "Hierarchies and Bureaucracies: On the Role of Collusion in Organizations," Journal of Law, Economics and Organization, Oxford University Press, vol. 2(2), pages 181-214, Fall.
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