Implications For Consumer Welfare Research Articles

What Consumers Don't Know Can Hurt Them: Consumer Evaluations and Disease Risk Perceptions of Restaurant Menu Items

Legislation that mandates the provision of nutrition information on restaurant meanus has been proposed in several states. This research presents findings from an experiment that investigates how the provision of nutrition information and a health claim influence consumers’ attitudes towards the product, nutrition‐related attitudes, disease risk perceptions, source credibility judgements, and nutrient value estimates for restaurant menu items. In addition, how the nutrition frame (or context) within which a menu item is evaluated moderates these effects is examined. The results indicate that providing target item nutrition information, as well as a nutritional context, affects consumers’ attitudes, perceptions, and judgments. In addition, the context interacts with the provision of both a health claim and nutrition information for the target item. The theoretical, managerial, consumer welfare, and public policy implications of our research findings are discussed.

Uniform Gasoline Price Regulation: Consequences for Consumer Welfare

In this paper, we assess the long-run implications for consumer welfare of proposed uniform gasoline price regulation. Such regulation would allow lessee dealers to ignore the terms of their lease agreements and purchase gasoline at the 'rack' (i.e., a wholesale distribution terminal) or from whomever and wherever they choose (most typically a 'jobber', i.e., an independent distributor). We show that such regulation would harm consumer welfare by raising wholesale and retail prices without benefiting lessee dealers. Prices would increase because the proposed regulation would prohibit efficient pricing that reflects differences in costs and demand that vary by geographic area and by type of distribution. We also show that even under the assumption that price differences result solely from price discrimination, uniform price regulation will not necessarily benefit consumers or all lessee dealers.

The Information Content of Mutual Fund Print Advertising

The mutual fund industry has experienced tremendous growth in recent years. During this time period mutual funds have become somewhat of a commodity with many funds using advertising to attract investors. The current study uses content analysis to determine the informational content of fund advertising. The results indicate that while the average number of informational cues increased during the time period 1979 to 1989, there was no significant increase in the information content of mutual fund advertising between 1989 and 1999. Relatively few funds include information such as loads, 12b‐1 fees, and expense ratios in their advertisements, and fund ads rarely discuss risk.

Overview of the Special Issue—Marketing's Information Technology Revolution: Implications for Consumer Welfare and Economic Performance

Just as the Internet creates many exciting new opportunities, it also introduces many new questions that warrant careful study. To illustrate, the growth of e-commerce raises the question whether Internet transactions should be treated any differently (i.e., for tax purposes) from corresponding transactions conducted by mail or telephone. Increasing Internet usage also raises questions about how best to protect consumer privacy and prevent digital piracy. In addition, the great potential of the Internet to enable communication and disseminate information leads to questions regarding what action, if any, regulators should take to encourage the deployment on a reasonable and timely basis of advanced telecommunications capability to all Americans, as mandated in the Telecommunications Act of 1996 (47 U.S.C. s 706). For example, should any restrictions be imposed on the firms that provide broadband Internet services or on the terms and conditions under which

On the Efficiency of Internet Markets for Consumer Goods

The authors examine the consumer welfare implications of changes in the structure of e-commerce markets employing comprehensive data collected from BizRate.com in November 2000 and November 2001. They find that price dispersion decreased substantially between these two periods and that measured differences in e-tailer services bear little relation to e-tailer prices.

Overview of the Special Issue-Marketing?s Information Technology Revolution: Implications for Consumer Welfare and Economic Performance

Overview of the Special Issue-Marketing?s Information Technology Revolution: Implications for Consumer Welfare and Economic Performance

Consumption Effort: The Mental Cost of Generating Utility and the Role of Consumer Energy Level in Ambitious Consumption

We propose that the essence of consumption is the mental process of generating utility from products, that this process expends consumption effort, and that consumers take consumption effort into account in their decision making. In 2 studies, we tested the hypothesis that consumption preferences become more ambitious—individuals become more inclined to choose challenging‐to‐consume products—when consumer energy levels are elevated. In Study 1, energy induced by ingesting caffeine increased participants’ tendency to choose subtitled foreign movies rather than domestic remakes of those same movies. Study 2 demonstrated the same effect with naturally occurring energy levels and with consumption experiences whose effortfulness and quality were varied independently. In choosing among sets of poems to read, participants with higher levels of energy exhibited less effort aversion but neither more nor less quality seeking. A reanalysis of Study 1 showed that the energy effect is not simply a case of consumers using more energy when they have more energy, because the energy effect disappeared when participants were made aware of the energy source, suggesting that a preference‐correction process occurred. The energy dependence of consumer preferences affords tactical opportunities for marketers, but the welfare implications for consumers are intriguingly unclear, because in both studies we found that energy increased participants’ choice of challenging consumption experiences without increasing their liking of those experiences.

An Experimental Assessment of the Effects of Two Alcoholic Beverage Health Warnings Across Countries and Binge‐Drinking Status

In recent years, alcohol‐related problems on college campuses have been well documented. This research examines how two different alcoholic beverage health warnings placed on the label of a fictitious brand of beer influence alcohol‐related risk perceptions, attitudes and intentions, and characterizations of problem‐drinking behaviors of binge and non‐binge drinkers in Australia and the United States. The consumer welfare implications of our findings, which show that the dependent measures are influenced by both main and interaction effects, are discussed.

Consumers' Search and Use of Nutrition Information: The Challenge and Promise of the Nutrition Labeling and Education Act

Four studies investigate the Nutrition Labeling and Education Act's (NLEA's) impact on how consumers use nutrition information. Field and laboratory studies compare, but do not detect any changes in, consumers' search for nutrition information or their recall of this information in the pre- and post-NLEA periods. However, the search activities of a select group (highly motivated and less knowledgeable consumers) benefited more from the NLEA than did other groups. Additional results from the field and lab studies indicate that the NLEA changed attention to negative nutrition attributes (such as fat and sodium, of which less is better) more than it changed attention to positive attributes such as calcium and vitamins. Analyses of scanner databases confirm this trend (with the exception of calories). Focus group results also reflect these findings. The authors discuss implications for public policy, management, academic research, and consumer welfare.

Taxation by Regulation and Regulation by Taxation: The Case of Local Cable TV Regulation

Until late 1986, municipalities played a major role in cable television regulation.Municipalities not only regulated pricing and quality decisions but also taxed cablesystems in the forms of in-kind and in-cash concessions. These activities appear tofit well with the concept of taxation-by-regulation, which concludes that consumerwelfare is reduced because of the rent seeking behavior of local politicians. At thesame time however, the notion of regulation-by-taxation is equally plausible. Thatis, politicians may use taxation as a means to regulate the activity of a monopoly bylimiting monopoly rents and improving consumer welfare. This article empiricallyseparates these two effects and investigates the implications for consumer welfare.

Consumer Perceptions of Privacy and Security Risks for Online Shopping

Government and industry organizations have declared information privacy and security to be major obstacles in the development of consumer‐related e‐commerce. Risk perceptions regarding Internet privacy and security have been identified as issues for both new and experienced users of Internet technology. This paper explores risk perceptions among consumers of varying levels of Internet experience and how these perceptions relate to online shopping activity. Findings provide evidence of hypothesized relationships among consumers’ levels of Internet experience, the use of alternate remote purchasing methods (such as telephone and mail‐order shopping), the perceived risks of online shopping, and online purchasing activity. Implications for online commerce and consumer welfare are discussed.

Effects of Nutrition Facts Panel Values, Nutrition Claims, and Health Claims on Consumer Attitudes, Perceptions of Disease-Related Risks, and Trust

In a between-subjects experiment, the authors examine how differences in Nutrition Facts information on fat and fiber, coupled with differing claims for these nutrients (including multiple nutrient claims and a health claim), influence consumers’ product evaluations, perceptions and awareness of disease risk, and trust of the claims and Nutrition Facts information. Results show that the Nutrition Facts information regarding fat affects consumers’ evaluations and perceptions of disease risk but that information on fiber does not. Claims do not affect product evaluations or purchase intentions, and there is a weak effect of inclusion of a health claim on disease risk perceptions. Consumers are less likely to recognize incongruencies in claim and Nutrition Facts information about fiber than fat. Incongruencies regarding the level of fat in the product result in lower trust in the claim information but do not affect trust in the Nutrition Facts data. The authors discuss implications for consumer welfare and public policy.

On the Efficiency of Internet Markets for Consumer Goods

Despite claims that electronic commerce lowers search costs dramatically, and therefore makes it easy for consumers to spot the best buy, empirical studies have found a substantial degree of price dispersion in electronic markets for consumer goods. This study investigates the consumer welfare implications of observed price levels and price dispersion in electronic markets. We examine the consumer welfare implications of changes in the structure of electronic commerce markets employing comprehensive data sets on e-tailer prices and services collected from BizRate.com in November 2000 and 2001. We find that price dispersion decreased substantially between these two periods, and that measured differences in e-tailer services bear little relation to e-tailer prices.

The Economics of Freebies in Exchange for Consumer Information on the Internet: An Exploratory Study

:A recent phenomenon in Internet advertising is the evolution of Web-based organizations that provide free e-mail services, or promotional rebates, or even cash to “qualified” on-line consumers who are willing to interact with them and view the advertisements. In order to qualify for such free services, consumers provide information on their demographics, life-styles, and preferences for products/services. The organizations use the information to target interactive advertisements of their corporate clients to the appropriate users. Different terms have been used to describe the concept, but from a business transaction viewpoint, these Web-based organizations act as intermediaries in collecting information from the consumers, paying for the information using freebies, and, in turn, selling it to corporate clients. Recently, several such” cybermediaries” have been the subject of takeovers by Microsoft and other Internet “portal” organizations. This paper describes the various business models that have been adopted by these cybermediaries, examining the economic issues of the models and the implications for consumer welfare. The continued viability of the market is explored in light of recent concerns regarding breaches in privacy of consumer information. Finally, the impact of different schemes used for pricing advertisements on the business models adopted by the organizations is discussed.

Why Consumers Choose Managed Mutual Funds Over Index Funds: Hypotheses from Consumer Behavior

Much evidence exists which suggests that the vast majority of equity mutual fund managers do not possess differential information (or skills) which allow them to achieve above average market returns for their investors. Thus, when investors pay fees to equity mutual fund managers for investment advice and management, the very probable outcome is that they are reducing the return that they would otherwise achieve by investing in a nonmanaged index fund that tracks the total stock market (e.g., Wilshire 5000) or some significant portion of it (e.g., the Standard & Poor's 500). The long‐term negative consumer welfare implications are large, very possibly in the hundreds of thousands of dollars for individual consumer investors. Drawing largely on insights from the psychology, consumer behavior, and behavioral finance literatures, we offer a series of hypotheses that may partially account for such consumer choices. We conclude with a call for increased government‐ and employer‐sponsored education programs aimed at creating a more informed consumer investor.

Characteristics and Beliefs Associated with Probable Pathological Gambling: A Pilot Study with Implications for the National Gambling Impact and Policy Commission

Consistent with a specific objective of the National Gambling Impact and Policy Commission Act (Public Law 104–169, 100 Stat., Section 4), this article examines some background, psychological, comorbidity, and personality characteristics and beliefs associated with pathological gambling. The authors develop hypotheses pertaining to differences between probable pathological gamblers and the general population. These hypotheses are tested using two samples: (1) a sample of gamblers, composed of members of Gamblers Anonymous and persons clinically diagnosed and in treatment for pathological gambling (n = 44) and (2) a random sample from the three-state area in which the study was conducted. The results show marked differences between these groups. The authors address implications for consumer welfare and public policy.

Vertical market relations in the UK grocery trade: analysis and Government policy

The article examines trends in the market power relationship between UK grocery manufacturers and retailers over the past 10‐15 years. It identifies the underlying causes of trends in this area, the implications for consumer welfare, and the legislative framework relating to these relations. Contributory factors to the changed market‐power relationship are relative manufacturer and retailer firm size and market share, individual manufacturing firm market dependence upon particular retailers, information technology, private label merchandise and product development activities, logistics arrangements and other vertical links between manufacturers and retailers. Aspects of welfare economics are examined as a basis for assessing consumer outcomes in this area, and past and present government legislation in the matter is considered, together with some reference to international comparisons. A case is made for some further strengthening of the relevant legislation in the UK.

Age, Product Nutrition, and Label Format Effects on Consumer Perceptions and Product Evaluations

Nutrition label format effects across different levels of product nutrition value and groups of younger (under 58 years; average 46 years) and older consumers (58 years or more; average 70 years) are examined using a 3 × 2 × 2 experimental design. Age interacts with nutrition level in affecting nutrition evaluation measures with older consumers displaying smaller differences in nutrition attitude and purchase likelihood for a low versus a high nutrition value product. Older consumers also perceive all labels as more difficult to understand. Consumer performance on judgment tasks vary across label formats and nutrition value manipulations. Implications for consumer welfare and future research are offered.

Gender Differences for Appearance-Related Attitudes and Behaviors: Implications for Consumer Welfare

Drawing from a sociocultural perspective, the authors examine the influences of gender and concern and perception of appearance on a variety of dependent variables in four different studies. Although appearance concern affects the attitudes and behaviors of both men and women, gender often moderates the strength of these relationships. Several of the authors’ findings have important consumer welfare implications. Specifically, they argue that sociocultural norms pertaining to appearance encourage women to engage in potentially harmful behaviors, such as eating disorders, cosmetic surgery, and intentional sunbathing, to a larger degree than men.

Consumer Welfare Implications of Changes in Interstate Telephone Pricing

Past practice in regulating telephone prices has encouraged telephone companies to incur excessive costs. The Federal Communications Commission has recently changed some of these practices. In this paper the consumer welfare implications of some of these changes are examined, primarily the institution of interstate subscriber line charges and changes in the procedures for allocating costs among jurisdictions. The conclusion is that these changes serve consumer interests.