Information Cost and Consumer Choices of Healthy Foods

Abstract

This article examines whether or not a reduction in consumer search cost for nutritional information increases the probability that heterogeneous consumers will choose healthier food products. Empirical results from the ready‐to‐eat breakfast cereal (RTEC) market confirm the conceptual analysis that lowering information cost via simplified nutritional labeling increases the healthfulness of consumer choices. The healthfulness attribute weighs 28.44% more heavily in consumers' decision‐making with simpler labeling systems. On average, introducing front‐of‐package labeling increased the probability of a consumer choosing a healthy RTEC by 3.49% and reduced the probability of choosing an unhealthy RTEC by 3.81%. Calories, sugar, saturated fat, and sodium consumption decrease by 0.31%, 2.63%, 6.94%, and 1.97%, respectively. Fiber intake increases by 3.24%. Further results show that less‐educated and smaller households with less frequent purchases benefit the most from a reduction in information cost. Overall, this article shows the potentially positive role that voluntary, more convenient labeling could play in improving market and public health outcomes.