Abstract: This paper computes the welfare benefits of additional information about nutritional content in food by revealed preference and evaluates quantitatively whether the estimated behavioral response is consistent with information from experts on the relationship between diet and health. In doing so, it provides estimates of the impact of the law mandating nutrition labeling for all prepackaged foods in the US on nutrient consumption. Estimates derived from a structural model identified… CONTINUE READING
Figure 2: N(P ) gives the demand curve for a sample product j as a function of the generalized price P . P̂ gives the apparent price prior to nutrition labeling, P ∗ gives the price after nutrition labeling, and Phat gives the true price if individuals were fully aware of all health relevant factors. The most lightly shaded region gives the welfare gain from labeling judged from the benchmark of P ∗, the value computed in Section 7.1. The medium-gray region gives the correction to this welfare gain when the change in consumption is judged using the fully informed marginal cost Ptrue. The most darkly shaded region gives the additional welfare gain that could be realized if individuals observed Ptrue and changed their consumption to Ntrue.