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Healthy vs. unhealthy food: a strategic choice for firms and consumers

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  • Fernando Antoñanzas
  • Roberto Rodríguez-Ibeas

Abstract

In this paper, we carry out a theoretical analysis of the strategic choice made by firms regarding the type of food they market when they face consumers who care about the healthy/unhealthy attributes of the product but incur in emotional/health costs when the food they consume has unhealthy attributes. We consider a two-stage game. In the first stage, one of the firms chooses the unhealthy content of its product. In the second stage, both firms simultaneously decide their prices. We find that, depending on the parameters of the model, product differentiation can be maximal or less than maximal. The firm that produces the unhealthy food charges a higher price and obtains a larger share of the market unless the emotional/health costs and the unhealthy food production costs are relatively high. We also find that educational campaigns will not always reduce the demand for the unhealthy food or the degree of the unhealthy attribute. JEL Classification:I10, I18, L11 Copyright Antonanzas and Rodriguez-Ibeas; licensee Springer. 2011

Suggested Citation

  • Fernando Antoñanzas & Roberto Rodríguez-Ibeas, 2011. "Healthy vs. unhealthy food: a strategic choice for firms and consumers," Health Economics Review, Springer, vol. 1(1), pages 1-8, December.
    • Handle: RePEc:spr:hecrev:v:1:y:2011:i:1:p:1-8:10.1186/2191-1991-1-4
    DOI: 10.1186/2191-1991-1-4
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    References listed on IDEAS

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    1. Avner Shaked & John Sutton, 1982. "Relaxing Price Competition Through Product Differentiation," The Review of Economic Studies, Review of Economic Studies Ltd, vol. 49(1), pages 3-13.
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    3. David M. Cutler & Edward L. Glaeser & Jesse M. Shapiro, 2003. "Why Have Americans Become More Obese?," Journal of Economic Perspectives, American Economic Association, vol. 17(3), pages 93-118, Summer.
    4. Jaskold Gabszewicz, J. & Thisse, J. -F., 1979. "Price competition, quality and income disparities," Journal of Economic Theory, Elsevier, vol. 20(3), pages 340-359, June.
    5. Zheng, Xiaoyong & Zhen, Chen, 2008. "Healthy food, unhealthy food and obesity," Economics Letters, Elsevier, vol. 100(2), pages 300-303, August.
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    More about this item

    Keywords

    Healthy food; Unhealthy food; Obesity; Educational campaigns;
    All these keywords.

    JEL classification:

    • I10 - Health, Education, and Welfare - - Health - - - General
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health
    • L11 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Production, Pricing, and Market Structure; Size Distribution of Firms

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