Waiting for the Invisible Hand: Market Power and Endogenous Information in the Modern Market for Food
In many ways, the modern market for food exemplifies the economist’s conception of perfect competition, with many buyers, many sellers, and a robust and dynamic marketplace. But over the course of the last century, the U.S. has witnessed a dramatic shift away from traditional diets and toward a diet comprised primarily of processed brand-name foods with deleterious long-term health effects. This, in turn, has generated increasingly urgent calls for policy interventions aimed at improving the quality of the American diet. In this paper, we ask whether the current state of affairs represents a market failure, and—if so—what might be done about it. We review evidence that most of the nutritional deficiencies associated with today’s processed foods were unknown to nutrition science at the time these products were introduced, promoted, and adopted by American consumers. Today more is known about the nutritional implications of various processing technologies, but a number of forces—including consumer habits, costly information, and the market power associated with both existing brands and scale economies—are working in concert to maintain the status quo. We argue that while the current brand-based industrial food system (adopted and maintained historically as a means of preventing competition from small producers) has its advantages, the time may have come to consider expanding the system of quality grading employed in commodity markets into the retail market for food.
|Date of creation:||Feb 2009|
|Contact details of provider:|| Postal: PO Box 646210, Pullman, WA 99164-646210|
Web page: http://faculty.ses.wsu.edu/
More information through EDIRC
References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Unnevehr, Laurian J. & Jagmanaite, Evelina, 2008. "Getting rid of trans fats in the US diet: Policies, incentives and progress," Food Policy, Elsevier, vol. 33(6), pages 497-503, December.
- Alston, Julian M. & Sumner, Daniel A. & Vosti, Stephen A., 2008. "Farm subsidies and obesity in the United States: National evidence and international comparisons," Food Policy, Elsevier, vol. 33(6), pages 470-479, December.
- Milgrom, Paul & Roberts, John, 1986.
"Price and Advertising Signals of Product Quality,"
Journal of Political Economy,
University of Chicago Press, vol. 94(4), pages 796-821, August.
- Paul R. Milgrom & John Roberts, 1984. "Price and Advertising Signals of Product Quality," Cowles Foundation Discussion Papers 709, Cowles Foundation for Research in Economics, Yale University.
- David M. Cutler & Edward L. Glaeser & Jesse M. Shapiro, 2003. "Why Have Americans Become More Obese?," Journal of Economic Perspectives, American Economic Association, vol. 17(3), pages 93-118, Summer.
- David M. Cutler & Edward L. Glaeser & Jesse M. Shapiro, 2003. "Why Have Americans Become More Obese?," Harvard Institute of Economic Research Working Papers 1994, Harvard - Institute of Economic Research.
- Shapiro, Jesse & Glaeser, Edward & Cutler, David, 2003. "Why Have Americans Become More Obese," Scholarly Articles 2640583, Harvard University Department of Economics.
- David Cutler & Edward Glaeser & Jesse Shapiro, 2003. "Why Have Americans Become More Obese?," NBER Working Papers 9446, National Bureau of Economic Research, Inc.
- Schmalensee, Richard, 1982. "Product Differentiation Advantages of Pioneering Brands," American Economic Review, American Economic Association, vol. 72(3), pages 349-365, June.
- Schmalensee, Richard., 1980. "Product differentiation advantages of pioneering brands," Working papers 1140-80., Massachusetts Institute of Technology (MIT), Sloan School of Management.
- William A. Masters & Diakalia Sanogo, 2002. "Welfare Gains from Quality Certification of Infant Foods: Results from a Market Experiment in Mali," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 84(4), pages 974-989.
- William Masters & Diakalia Sanogo, 2002. "Welfare gains from quality certification of infant foods: Results from a market experiment in mali," Framed Field Experiments 00191, The Field Experiments Website.
- 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.
- Shin-Yi Chou & Michael Grossman & Henry Saffer, 2002. "An Economic Analysis of Adult Obesity: Results from the Behavioral Risk Factor Surveillance System," NBER Working Papers 9247, National Bureau of Economic Research, Inc.
- Smith Trenton G. & Stoddard Christiana & Barnes Michael G, 2009. "Why the Poor Get Fat: Weight Gain and Economic Insecurity," Forum for Health Economics & Policy, De Gruyter, vol. 12(2), pages 1-31, June.
- Trenton Smith & Christiana Stoddard & Michael G. Barnes, 2007. "Why the Poor Get Fat: Weight Gain and Economic Insecurity," Working Papers 2007-16, School of Economic Sciences, Washington State University.
- 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.
- Smith, Trenton G, 2002. "The McDonald's Equilibrium: Advertising, Empty Calories, and the Endogenous Determination of Dietary Preferences," University of California at Santa Barbara, Economics Working Paper Series qt0hx9x4jr, Department of Economics, UC Santa Barbara.
- Nelson, Phillip, 1970. "Information and Consumer Behavior," Journal of Political Economy, University of Chicago Press, vol. 78(2), pages 311-329, March-Apr.
- Smith, Trenton G. & Tasnadi, Attila, 2007. "A theory of natural addiction," Games and Economic Behavior, Elsevier, vol. 59(2), pages 316-344, May.
- Trenton G. Smith & Attila Tasnádi, 2005. "A Theory of Natural Addiction," Microeconomics 0503006, EconWPA.
- Smith, Trenton G. & Tasnadi, Attila, 2005. "A Theory of Natural Addiction," 2005 Annual meeting, July 24-27, Providence, RI 19195, American Agricultural Economics Association (New Name 2008: Agricultural and Applied Economics Association).
- Parke E. Wilde, 2007. "Federal Communication about Obesity in the Dietary Guidelines and Checkoff Programs," Chapters,in: Obesity, Business and Public Policy, chapter 9 Edward Elgar Publishing.
- Parke Wilde, "undated". "Federal Communication about Obesity in the Dietary Guidelines and Checkoff Programs," Working Papers in Food Policy and Nutrition 27, Friedman School of Nutrition Science and Policy, revised May 2005.
- Elitzak, Howard, 2001. "Food Marketing Costs at a Glance," Food Review: The Magazine of Food Economics, United States Department of Agriculture, Economic Research Service, vol. 24(3).
- Reardon, Thomas & Codron, Jean-Marie & Busch, Lawrence & Bingen, R. James & Harris, Craig, 1999. "Global Change In Agrifood Grades And Standards: Agribusiness Strategic Responses In Developing Countries," International Food and Agribusiness Management Review, International Food and Agribusiness Management Association (IFAMA), vol. 2(03/04).
- 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.
- John M. Crespi & St)phan Marette, 2001. "How Should Food Safety Certification be Financed?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 83(4), pages 852-861.
- Inas Rashad & Sara Markowitz, 2007. "Incentives in Obesity and Health Insurance," NBER Working Papers 13113, National Bureau of Economic Research, Inc. Full references (including those not matched with items on IDEAS)
When requesting a correction, please mention this item's handle: RePEc:wsu:wpaper:chouinard-4. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Danielle Engelhardt)
If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.
If references are entirely missing, you can add them using this form.
If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.
If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.
Please note that corrections may take a couple of weeks to filter through the various RePEc services.