A hedonic price analysis of nutritionally labeled breakfast cereals: Implications for nutrient labeling

Abstract

Hedonic price techniques are used to determine the effects of nutrition content on purchasing behavior, and from this, to infer the effect of nutrition labeling information on consumer purchasing decisions. The technique applies regression analysis to the price of a product as a function of the product characteristics in order to estimate implicit values of specific product characteristics. By comparing these values over time, over market segments, with reported consumer preferences or with price data on products with similar characteristics in the market, the use of nutrition information by consumers can be inferred. As an example, hedonic price functions for breakfast cereal are estimated using data from four supermarkets. The results show that consumers need not be offered a lower price for products containing preservatives, and they are willing to pay more for products with an increased sugar and vitamin content. These results support the hypothesis that some consumers are reading labels to obtain certain specific nutrient information, but may not be using or are not able to use nutrition labeling to evaluate other product characteristics. The advantages of the hedonic price technique are that the data are readily available, the method is inexpensive, and the results pertain to current consumer purchaing decisions in the market. The technique is especially useful for assessing the effect of new labeling regulations on consumer purchasing decisions.