Can Information Costs Confuse Consumer Choice?---Nutritional Labels in a Supermarket Experiment

This paper investigates whether information costs prevent consumers from making healthier food choices under currently regulated nutritional labels in a market-level experiment. Implemented nutritional shelf labels reduce information costs by either repeating information available on the Nutritional Facts Panel, or providing information in a new format. We analyze microwave popcorn purchases using weekly store-level scanner data from both treatment and control stores in a difference-in-differences and synthetic control method approach. Our results suggest that information costs affect consumer purchase decisions. In particular, no trans fat labels significantly increase sales, even though this information is already available on the package. Low calorie labels significantly increase sales, while correlated low fat labels significantly decrease sales, suggesting that labeling response may also be influenced by consumers' taste perceptions. Finally, combining multiple claims in a single label reduces the effectiveness of the implemented labels. Our results provide direct implications for changes to the format and content of nutritional labeling currently considered by the Food and Drug Administration.