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The Use of Voluntary Marketing Initiatives to Improve the Nutritional Profile of Kids Cereals*

Michael Cohen (), Rui Huang () and Chen Zhu
Additional contact information
Michael Cohen: New York University
Rui Huang: University of Connecticut

No 11, Working Papers from University of Connecticut, Department of Agricultural and Resource Economics, Charles J. Zwick Center for Food and Resource Policy

Abstract: This article develops a framework to analyze voluntary marketing initiatives aimed at reducing children’s exposure to high-calorie packaged foods. Our empirical investigation focuses on children’s ready-to-eat cereal; we begin by estimating a limited awareness differentiated product demand model using a panel of consumer purchase and television advertising data. We use the demand estimates in a dynamic model of pricing and advertising competition in which firms have the option of participating in an initiative that defines nutritional standards for products targeted toward children. Participation requires that firms either comply with nutritional standards by reformulating their product or stop advertising. Results from our analysis indicate that leading firms should choose participation and reformulation as the strictly dominant strategy as long as prospective product reformulation costs do not exceed the marginal profitability of reformulation.

Pages: 55 pages
Date: 2012-05
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