Can Information Costs Affect Consumer Choice? Nutritional Labels in a Supermarket Experiment

• Departmental Seminar

Date and Location

Friday, February 27, 2015, 2:30 AM - 4:00 AM
ARE Conference Room, 2102 Social Sciences and Humanities

Abstract

This paper investigates whether information costs under currently regulated nutritional labeling prevent consumers from making healthier food choices. We implement five nutritional shelf label treatments in a market-level experiment. These labels reduce information costs by highlighting and summarizing information available on the Nutritional Facts Panel. Following a difference-in-differences and synthetic control method approach, we analyze weekly store-level scanner data for microwave popcorn purchases from treatment and control stores. Our results suggest that consumer purchases are affected by information costs. Implemented low calorie and no trans fat labels increase sales. In contrast, implemented low fat labels decrease sales, suggesting that consumer response is also influenced by consumers' taste perceptions. A combination of these claims into one label treatment increases information costs and does not affect sales significantly.