Advances in Management and Applied Economics

Friend or PHO? On the Marginal Valuation of Reducing the Content of Trans Fat in Processed Foods

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  • Abstract

    Ahead of the January 1, 2006 deadline for mandatory labeling of trans fat, Nabisco, a leading brand in the market for crackers a $1 billion processed food category and ranked amongst the top sources of trans fat reformulated a subset of their existing products and voluntarily labeled them as trans fat-free. New products were also introduced in the market and labeled as trans fat-free as well. The purpose of this study was to determine the implicit price of products voluntarily labeled as trans fat-free. Using a national level weekly scanner data set and controlling for the other observable product attributes, such as non-PHO fat labels, whole grain labels, sodium labels, variety, and package size, in addition to market conditions, the implicit price of the voluntary trans fat-free label was estimated to be $0.53 per pound, or a premium over the base case of 17.64 percent.

    JEL classification numbers: D12, M38, Q18
    Keywords: Food Labeling Policy, Hedonic Pricing, Retail Scanner Data, Trans Fat.