Information, Advertising, and Health Choices: A Study of the Cereal Market

Abstract

In markets where conditions are changing rapidly, the flow of information to consumers becomes a primary determinant of welfare. Individuals’ food choices represent an important example of consumption decisions in a changing environment. The rapidly developing scientific evidence linking diet and health now indicates that individual dietary choices are important determinants of health; five of the top ten causes of death in the U.S. have been substantially linked to diet (U.S. Surgeon General 1988). Clearly, this evolving scientific information can improve welfare only if it is assimilated into consumers’ decision-making. Yet, our understanding of how economic forces determine whether information is quickly incorporated into decisions is quite limited.

This chapter does not necessarily represent the views of the Federal Trade Commission or any of its members. We would like to thank Ronald Bond, Richard Ippolito, Howard Marvel, Janice Pappalardo, Paul Pautler, participants in the Federal Trade Commission and University of Chicago seminars, and two anonymous reviewers for helpful comments on earlier versions of this work. This work was supported by the Federal Trade Commission, and the results presented here are drawn from a broader study of health claim advertising in the cereal market.