Consumer Misinformation and the Brand Premium: A Private Label Blind Taste Test

Abstract

To study consumer brand misinformation, we run in-store blind taste tests with a retailer’s private label food brands and the leading national brand counterparts in three large consumer packaged goods categories. Subjects self-report very high expectations about the quality of the private labels relative to national brands. However, they predict a relatively low probability of choosing them in a blind taste test. An overwhelming majority systematically choose the private label in the blinded test. Using program evaluation methods, we find that the causal effect of this intervention on treated consumers increases their market share for the tested private label product by 15 share points during the week after the intervention, on top of a base share of 8 share points. However, the effect diminishes to 8 share points during the second to fourth weeks after the test and to 2 share points during the second to fifth months after the test. Using a structural model of demand that controls for the self-selected participation and allows for heterogeneous treatment effects, we show that these effects survive controls for point-of-purchase prices, purchase incidence, and the feedback effects of brand loyalty. We also find that the intervention increases the preference for the private label brands, and that it decreases the preference for the national brands, relative to the outside good. Interpreting the intervention as an information treatment about the product, we find evidence consistent with an economically large informational barrier on demand for the private label product relative to an established national brand.