Hostname: page-component-848d4c4894-p2v8j Total loading time: 0 Render date: 2024-05-09T16:54:11.370Z Has data issue: false hasContentIssue false

Economic Perspectives on Food Choices, Marketing, and Consumer Welfare

Published online by Cambridge University Press:  27 July 2022

Fabrice Etilé*
Affiliation:
FRENCH NATIONAL RESEARCH INSTITUTE FOR AGRICULTURE, FOOD AND THE ENVIRONMENT (INRAE) AND THE PARIS SCHOOL OF ECONOMICS, PARIS, FRANCE

Abstract

This contribution reviews the main normative and positive arguments that can used in the assessment of the costs and benefits of food marketing restrictions, focusing specifically on theoretical and empirical developments in the economics of advertising, consumer behaviour and industrial organization since the 70s.

Type
Symposium Articles
Copyright
© 2022 The Author(s)

Access options

Get access to the full version of this content by using one of the access options below. (Log in options will check for institutional or personal access. Content may require purchase if you do not have access.)

References

Supiot, A., La gouvernance par les nombres. Cours au Collège de France (2012-2014) Poids et Mesures du Monde (Paris: Fayard, 2015).Google Scholar
Coleman, J.L., “Economics and the Law: A Critical Review of the Foundations of the Economic Approach to Law,” Ethics 94, no. 4 (1984): 649679; A. M. White, “Behavior and Contract,” Minnesota Journal of Law & Inequality 27, no. 1 (2009): 135-179.CrossRefGoogle Scholar
“Does Food Marketing Need to Make Us Fat? A Review and Solutions,” Nutrition Reviews 70, no. 10 (2012): 571–593; Dowling, K., Guhl, D., Klapper, D., Spann, M., Stich, L., and Yegoryan, N., “Behavioral Biases in Marketing,Journal of the Academy of Marketing Science 48, no. 3 (2020): 449477‑.CrossRefGoogle Scholar
Bagwell, K., “The Economic Analysis of Advertising,” Handbook of industrial Organization 3 (2007): 17011844; L. Pepall and D. Richards Advertising and the Marketplace: An Economics Perspective (Cheltenham, UK: Edward Elgar Publishing, 2021).Google Scholar
Heidhues, P. and Köszegi, B., “Behavioral Industrial Organization,” in Handbook of Behavioral Economics: Applications and Foundations (North-Holland: Elsevier, 2018): 517612.Google Scholar
Shapiro, B. T., Hitsch, G. J., and Tuchman, A. E., “TV Advertising Effectiveness and Profitability: Generalizable Results from 288 Brands,” Econometrica 89, no. 4 (2021): 18551879.CrossRefGoogle Scholar
See Pepall and Richards, supra note 4; Bagwell, supra note 4.Google Scholar
Foucault, M., La Naissance de la biopolitique . Cours au Collège de France (1978-1979) (EHESS, Gallimard, Seuil. Hautes Etudes. Paris: Seuil 2004).Google Scholar
Dragone, D., “A Rational Eating Model of Binges, Diest and Obesity,” Journal of Health Economics 28, no. 4 (2009): 799804.CrossRefGoogle Scholar
Pinell, P., “Modern Medicine and the Civilising Process,” Sociology of Health & Illness 18, no. 1 (1996): 116. Pinell calls “homo medicus” the human subject as it is envisioned by modern public health policies. The homo medicus is a human who “has to be perfectly self-controlled in order to look at one’s own body with scientific objectivity” (p. 13) and has to behave as an actor, or more precisely, as an agent of one’s own health. Hence, both the homo oeconomicus and the homo medicus are supposed to have agentic capacities that make them responsible for their own health, but the homo oeconomicus is willing to make trade-offs between one’s consumption utility and one’s health.Google Scholar
Moral hazard is also a critical market failure. It stems from the inability or the legal impossibility of the insurance provider to incentivize properly individuals so that their insurance premium correctly reflects their prevention efforts. See Cawley, J., “An Economy of Scales: A Selective Review of Obesity’s Economic Causes, Consequences, and Solutions,” Journal of Health Economics 43 (2015): 244-268, for a detailed discussion of the health care costs of obesity where private health insurance is important. When insurance is public, taxing unhealthy food may be a means of solving the moral hazard problem.CrossRefGoogle Scholar
OECD Health Policy Studies, The Heavy Burden of Obesity: The Economics of Prevention (Paris: OECD, 2019).Google Scholar
O’Donoghue, T. and Rabin, M., “Optimal sin taxes,” Journal of Public Economics 90, no. 1011 (2006): 18251849.Google Scholar
Foucault, supra note 8.Google Scholar
Stigler, G. J., “The Economics of Information,” Journal of Political Economy 69, no. 3 (1961): 213225; L.G. Telser, “Advertising and Competition,” Journal of Political Economy 72, no. 6 (1964): 537-562.Google Scholar
Akerlof, G. A., “The Market for ‘Lemons’: Quality Uncertainty and the Market Mechanism,” The Quarterly Journal of Economics 84, no. 3 (1970): 488500.CrossRefGoogle Scholar
P.R. Milgrom, “Good News and Bad News: Representation Theorems and Applications,” The Bell Journal of Economics (1981): 380‑391‑; ‑Grossman, S. ‑J.‑‑, “‑The Informational Role of Warranties and Private Disclosure about Product Quality‑,” The Journal of Law and Economics 24, no. 3 (1981): 461483.CrossRefGoogle Scholar
See, J.A. Caswell and Padberg, D.I., “Toward a More Comprehensive Theory of Food Labels,” American Journal of Agricultural Economics 74, no. 2 (1992): 460468 for a detailed critic of the voluntary approach to nutritional labeling. It ignores that many consumers do not use labels for various reasons (time, cognition, interest), and that labeling regulations may also have an influence on product formulation.Google Scholar
Nelson, P., “Advertising as Information,” Journal of Political Economy 82, no. 4 (1974): 729754‑; P. ‑Nelson‑, “‑Advertising and Consumer Behavior‑,” Journal of Political Economy 78, no. 2 (1970): 311-329.CrossRefGoogle Scholar
Grossman, G. M. and Shapiro, C., “Informative Advertising with Differentiated Products,” The Review of Economic Studies 51, no. 1 (1984): 6381.Google Scholar
Anderson, S. P. and Renault, R., “Advertising Content,” American Economic Review 96, no. 1 (2006): 93113.CrossRefGoogle Scholar
Braithwaite, D., “The Economic Effects of Advertisement,” The Economic Journal 38, no. 149 (1928): 1637; A. Dixit and V. Norman, “Advertising and Welfare,” The Bell Journal of Economics 9, no. 1 (1978): 117.CrossRefGoogle Scholar
Dixit, A. and Norman, V., supra note 22.Google Scholar
Richards, T. and Padilla, L., “Promotion and Fast Food Demand,” American Journal of Agricultural Economics 91, no. 1 (2009): 168183.CrossRefGoogle Scholar
Kotowitz, Y. and Mathewson, F., “Informative Advertising and Welfare,” American Economic Review 69, no. 3 (1979): 284294.Google Scholar
Shiman, D. R., “When E-mail Becomes Junk Mail: The Welfare Implications of the Advancement of Communications Technology,” Review of Industrial Organization 11 (1996): 3548.CrossRefGoogle Scholar
A. Dixit and V. Norman, supra 22.Google Scholar
The argument is a bit technical. A marginal analysis focusses on variations induced by infinitely small variations in the environment, such as broadcasting just one more ad or launching just one more marketing campaign.Google Scholar
Stigler, G. J. and Becker, G. S., “De gustibus non est disputandum,” The American Economic Review 67, no. 2 (1977): 7690.Google Scholar
Becker, G.S. and Murphy, K. M., “A Simple Theory of Advertising as a Good or Bad,” The Quarterly Journal of Economics 108, no. 4 (1983): 94164.Google Scholar
See Chandon, P. and Wansink, B., “The Biasing Health Halos of Fast-Food Restaurant Health Claims: Lower Calorie Estimates and Higher Side-Dish Consumption Intentions,” Journal of Consumer Research,” 34, no. 3 (2007): 301314, for an extensive review of studies documenting the impacts of marketing on food choices.Google Scholar
Stroebe, W., Van Koningsbruggen, G. M., Papies, E. K., and Aarts, H., “Why Most Dieters Fail but Some Succeed: A Goal Conflict Model of Eating Behavior,” Psychological Review 120, no. 1 (2013): 110138.CrossRefGoogle ScholarPubMed
Chandon, P. and Ordabayeva, N., “Supersize in One Dimension, Downsize in Three Dimensions: Effects of Spatial Dimensionality on Size Perceptions and Preferences,” Journal of Marketing Research 46, no. 6 (2009): 739753.CrossRefGoogle Scholar
Zlatevska, N., Dubelaar, C., and Holden, S. S., “Sizing up the Effect of Portion Size on Consumption: A Meta-Analytic Review,” Journal of Marketing 78, no. 3 (2014): 140154.CrossRefGoogle Scholar
Chandon, P. and Wansink, B., “The Biasing Health Halos of Fast-Food Restaurant Health Claims: Lower Calorie Estimates and Higher Side-Dish Consumption Intentions,” Journal of Consumer Research 34, no. 3 (2007): 301‑314‑.CrossRefGoogle Scholar
Sharpe, K. M., Staelin, R., and Huber, J., “Using Extremeness Aversion to Fight Obesity: Policy Implications of Context Dependent Demand,” Journal of Consumer Research 35, no. 3 (2008): 406422.CrossRefGoogle Scholar
Chernev, A. and Gal, D., “Categorization Effects in Value Judgments: Averaging Bias in Evaluating Combinations of Vices and Virtues,” Journal of Marketing Research 47, no. 4 (2010): 738747.CrossRefGoogle Scholar
See Chandon and Wansink, supra note 35; Similarly, as outlined by Gardes and Rigby (2012) companies selling sugary drinks may exploit a health halo effect generated by their sponsorship of sport events, although we lack experimental evidence on this point. Garde, A. and Rigby, N., “Going for Gold-Should Responsible Governments Raise the Bar on Sponsorship of the Olympic Games and Other Sporting Events by Food and Beverage Companies?Communications Law 17, no. 2 (2012): 4249.Google Scholar
Connell, P. M., Brucks, M., and Nielsen, J. H., “How Childhood Advertising Exposure Can Create Biased Product Evaluations That Persist into Adulthood,” Journal of Consumer Research 41, no. 1 (2014): 119134.CrossRefGoogle Scholar
Harris, J. L., Bargh, J. A., and Brownell, K. D., “Priming Effects of Television Food Advertising on Eating Behavior,” Health Psychology 28, no. 4 (2009): 404413.CrossRefGoogle ScholarPubMed
Morton et al., “Neurobiology of Food Intake in Health and Disease,” Nature Reviews Neuroscience 15, no. 6 (2014): 367‑378‑, available at <https://doi.org/10.1038/nrn3745> (last visited May 27, 2022); Berthoud, H.-R., “The Neurobiology of Food Intake in an Obesogenic Environment,” Proceedings of the Nutrition Society 71, no. 4 (2012): 478487.CrossRefGoogle Scholar
Herrnstein, R. J., Loewenstein, G. F., Prelec, D., and Vaughan, W. Jr.Utility Maximization and Melioration: Internalities in Individual Choice,” Journal of Behavioral Decision Making 6, no. 3 (1993): 149185.CrossRefGoogle Scholar
Deighton, J., Henderson, C. M., and Neslin, S. A., “The Effects of Advertising on Brand Switching and Repeat Purchasing,” Journal of Marketing Research 31, no. 1 (1994): 2843.CrossRefGoogle Scholar
Ackerberg, D. A., “Advertising, Learning, and Consumer Choice in Experience Good Markets: An Empirical Examination,” International Economic Review 44, no. 3 (2003): 10071040.CrossRefGoogle Scholar
Shum, M., “Does Advertising Overcome Brand Loyalty? Evidence from the Breakfast-Cereals Market,” Journal of Economics & Management Strategy 13, no. 2 (2004): 241272.Google Scholar
Ippolito, P.M. and Mathios, A. D, “Health Claims in Food Marketing: Evidence on Knowledge and Behavior in the Cereal Market,” Journal of Public Policy & Marketing 10, no. 1 (1991): 1532.Google Scholar
Rao, A. and Wang, E., “Demand for ‘Healthy’ Products: False Claims and FTC Regulation,” Journal of Marketing Research 54, no. 6 (2017): 968989.CrossRefGoogle Scholar
Demonstrating the existence of complementary advertising is difficult. It requires showing that consuming a product increases the demand for the marketing of this product. This might be the case for the merchandising derived from movies, for instance, but it is more difficult to find examples for food.Google Scholar
Erdem, T., Keane, M. P., and Sun, B., “The Impact of Advertising on Consumer Price Sensitivity in Experience Goods Markets,” Quantitative Marketing and Economics 6, no. 2 (2008): 139176.CrossRefGoogle Scholar
Andreyeva, T., Kelly, I. R., and Harris, J. L., “Exposure to Food Advertising on Television: Associations with Children’s Fast Food and Soft Drink Consumption and Obesity,” Economics & Human Biology 9, no. 3 (2011): 221233; S.-Y. Chou, I. Rashad, and M. Grossman, “Fast-Food Restaurant Advertising on Television and its Influence on Childhood Obesity,” The Journal of Law and Economics 51, no. 4 (2008): 599-618.CrossRefGoogle Scholar
Dhar, T. and Baylis, K., “Fast-Food Consumption and the Ban on Advertising Targeting Children: The Quebec Experience,” Journal of Marketing research 48, no. 5 (2011): 799813.CrossRefGoogle Scholar
Goldberg, M.E., “A Quasi-Experiment Assessing the Effectiveness of TV Advertising Directed to Children,” Journal of Marketing Research 27, no. 4 (1990): 445454.CrossRefGoogle Scholar
Market studies are based on structural econometric models, where the term “structural” means that some fundamental behavioral parameters (consumer elasticities, unit cost of production) are inferred by making specific assumptions regarding the structure of consumer preferences, their decision-making process (they maximize a utility function), the cost structure of firms and the nature of competition. Quasi-experimental designs can be applied without relying on such assumptions. For instance, a comparison of trends in purchases between markets that “quasi-randomly” differ in the intensity of their exposure to marketing identifies the effect of marketing on purchased volumes. However, such quasi-experimental designs are often unable to explain all the mechanisms explaining the effect of interest. There is now a move toward studies that try to combine both approaches, thanks to the availability of new sources of data.Google Scholar
A rapidly growing literature propose ways of analyzing the impact of limited consideration set on consumer behavior and market competition. For instance, Huang and Bronnenberg (2018) postulate that consumers will consider a product only if the mental effort of consideration is offset by potential utility gains in terms of price. Using data on the US Yogurt market, they are able to estimate the monetary value of the cost of effort ($0.81). Huang, Y. and Bronnenberg, B.J., “Pennies for Your Thoughts: Costly Product Consideration and Purchase Quantity Thresholds,” Marketing Science 37, no. 6 (2018): 10091028.CrossRefGoogle Scholar
Eliaz, K. and Spiegler, R., “Beyond ‘Ellison’s Matrix’: New Directions in Behavioral Industrial Organization,” Review of Industrial Organization 47, no. 3 (2015): 259272.CrossRefGoogle Scholar
Bordalo, P., Gennaioli, N., and Shleifer, A., “Salience and Consumer Choice,” Journal of Political Economy 121, no. 5 (2013): 803843.CrossRefGoogle Scholar
Abratt, R. and Goodey, S. D., “Unplanned Buying and In‐Store Stimuli in Supermarkets,” Managerial and Decision Economics 11, no. 2 (1990): 111121, Dowling et al., supra note 3.CrossRefGoogle Scholar
This literature falls under the umbrella of “Behavioral Industrial Organization,” see Heihues and Köszegi, supra note 5.Google Scholar
Gabaix, X. and Laibson, D., “Shrouded Attributes, Consumer Myopia, and Information Suppression in Competitive Markets,” The Quarterly Journal of Economics 121, no. 2 (2006): 505540; Bordalo, supra note 56; P. Bordalo, N. Gennaioli, and A. Shleifer, “Competition for Attention,” The Review of Economic Studies 83, no. 2 (2016): 481-513.CrossRefGoogle Scholar
Spiegler, R., “Choice Complexity and Market Competition,” Annual Review of Economics 8 (2016): 125.CrossRefGoogle Scholar
Bordalo (2016), supra note 59; Eliaz, K. and Spiegler, R., “On the Strategic Use of Attention Grabbers,” Theoretical Economics 6, no. 1 (2011): 127155.CrossRefGoogle Scholar
Heidhues and Köszegi, supra note 5.Google Scholar
Bhargava, S. and Loewenstein, G., “Behavioral Economics and Public Policy 102: Beyond Nudging,” American Economic Review 105, no. 5 (2015): 396401.CrossRefGoogle Scholar
Chetty, R., “Behavioral Economics and Public Policy: A Pragmatic Perspective,” American Economic Review 105, no. 5 (2015): 133.CrossRefGoogle Scholar
Allcott, H., Lockwood, B. B., and Taubinsky, D., “Regressive Sin Taxes, with an Application to the Optimal Soda Tax,” The Quarterly Journal of Economics 134, no. 3 (2019): 15571626.CrossRefGoogle Scholar
Shapiro, supra note 6.Google Scholar
Chen, Y., Joshi, Y. V., Raju, J. S., and Zhang, Z. J., “A Theory of Combative Advertising,” Marketing Science 28, no. 1 (2009): 1-19.CrossRefGoogle Scholar