Beyond Consumer Switching: Supply Responses to Food Packaging and Advertising Regulations

39 Pages Posted: 3 Sep 2020

See all articles by Jorge Alé-Chilet

Jorge Alé-Chilet

Bar-Ilan University - Department of Economics

Sarah Moshary

University of Chicago - Booth School of Business

Date Written: August 21, 2020

Abstract

This paper studies the effect of nutrition warning labels and advertising restrictions on the breakfast cereal market in Chile. In June 2016, the Ministry of Health required food products that exceed thresholds for sugar (22.5g) and calories (350kcal) to carry conspicuous front-of-package warning labels. Further, these products were barred from advertising on TV programs with high child viewership. Early evidence suggests that the regulation induce consumers to switch to products without warning labels; we show that this change in demand elicits a supply response. In particular, we present evidence of bunching just below the cutoffs. Using a structural model of cereal demand, we find that reformulation tends to reinforce the intent of the reform, in particular, by lowering the calorie content of cereal purchases.

Keywords: Nutrition Labels, Obesity, Product Reformulation

JEL Classification: I18, M38, L51

Suggested Citation

Alé-Chilet, Jorge and Moshary, Sarah, Beyond Consumer Switching: Supply Responses to Food Packaging and Advertising Regulations (August 21, 2020). Available at SSRN: https://ssrn.com/abstract=3678744 or http://dx.doi.org/10.2139/ssrn.3678744

Jorge Alé-Chilet

Bar-Ilan University - Department of Economics ( email )

Ramat-Gan, 52900
Israel

Sarah Moshary (Contact Author)

University of Chicago - Booth School of Business ( email )

5807 S. Woodlawn Avenue
Chicago, IL 60637
United States

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