Using Extremeness Aversion to Fight Obesity: Policy Implications of Context Dependent Demand

Abstract

The authors would like to especially thank Kelly Davis and Greg Allenby for their research contributions. Additionally, the authors thank Bob Clemens and Preyas Desai for their helpful suggestions and comments. 3Obesity is now a global problem. Within the U.S., the rise in obesity has been largely driven by the increase in caloric consumption. Suggested solutions for decreasing consumption have included information provision and taxation on fast food. We investigate a third option that takes advantage of the behavioral regularity where consumers tend to avoid purchasing the smallest or largest size of a portfolio of options. We do so in the context of soft drinks purchased at fast food restaurants. Using a virtual shopping experiment, we estimate for each member of our national sample of adults, their value for drink size, price, and extremeness aversion. We then use these estimates in policy simulations to identify options that are most likely to reduce consumption with limited reduction in retailer profits. 4The average American is 24 pounds heavier now than in 1960 (Jacobson and McLay 2006).Over this same time period, the proportion of adults classified as overweight has grown from 44% to 66% 1 and the subset considered clinically obese has more than doubled from 13% to 32% of the population 2 (Flegal et al. 2002; Ogden et al. 2006). Like smoking, obesity has soci as well as personal costs. The estimated healthcare cost in the U.S. associated with overweight and obesity is well over $100 billion al uch of society.3 (DHHS 2001;Finkelstein, Fiebelkorn, and Wang 2003).Nearly half of this expense is borne by government healthcare programs (Medicaid and Medicare) while much of the remainder is met by health insurance premiums (Finkelstein et al. 2003). Because the cost is spread over all tax payers and insurance premium holders, obesity imposes negative externalities on mObesity is not unique to American consumers. For example in Canada, 59% of the population is overweight and 23% is obese (Tjepkema 2005). In England over the last 25 years, obesity has tripled (NHS 2005). Even France, long renowned for its thinness, has doubled its obesity levels in just a decade (Rosenthall 2005). According to the World Heath Organization (2003), an estimated one billion adults are overweight worldwide of whom 300 million are classified as clinically obese.Weight gain generally comes from an increase in consumption or a decrease in activity levels (exercise). 4 Despite the popular belief that exercise and activity levels have declined over the past several decades in the U.S., these levels have remained relatively flat (CDC 2001; CDC 2006a;Cutler, Glaeser, and Shapiro 2003;Kruger, Ham, and Kohl 2005). On the other hand, the 2003). Americans are eating more and this increase in caloric consumption can be directly tied to the observed rise in obesity (Carangelo 1995;Cutler et al. 2003;Young and Nestle 2002).As might be expected the increase in consumption has paralleled an increase in portion sizes (Schwartz and Byrd-Bredbenner...

Compromise and attraction effects in food choice

“…Following prior research on contexts effects (see Sharpe et al, 2008), the only information available to participants about the food was the focal attribute -calories per serving -and the price. The respondents were instructed to look through the options and to indicate which food item they would select in each of seven food categories.…”

Hedonic Eating Goals and Emotion: When Sadness Decreases the Desire to Indulge

“…First, we know that the negative long-term consequences of indulgence impact consumers in a number of ways, as reflected in consumer overspending (Baumeister 2002), weight gain and obesity (Sharpe, Staelin, and Huber 2008;Wang and Beydoun 2007), superfluous materialism (Ordabayeva and Chandon 2011), and addiction (Grant et al 2010). Second, consumers know they are susceptible to the negative consequences of indulgence (Cochran and Tesser 1996;Polivy and Herman 1985).…”

Social norms and rank-based nudging: Changing willingness to pay for healthy food.

“…For example, if the size of a food portion is doubled, people usually report this increase to be only around 50 to 70%. This bias is associated with higher likelihood of food overconsumption, especially because of the increasingly widespread offers of larger package sizes which are more profitable for food marketers (Chandon & Wansink, 2012).In contrast to the absolute account, evidence from both cognitive (e.g., Stewart, Brown, & Chater, 2005) and consumer psychology (e.g., Sharpe et al, 2008) has suggested that people evaluate size in relative terms -that is, people are highly sensitive to the context in which an evaluation (or a choice) is made. An individual product (e.g., a cereal bar, a ready meal) is evaluated with reference to other products (e.g., other cereal bars, other ready meals) available in the decision-making context -these can be labeled as effects of the immediate context.…”