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Research Highlights

Nudging Consumers to Make Healthy Choices

vishal singh body image

Our analysis supports the calls by health policy advocates and medical practitioners for the use of price-based instruments as a health policy tool to combat obesity.

Altering consumer behavior via public policies that nudge people toward healthier lifestyle choices has received a boost from NYU Stern Marketing Professor Vishal Singh. In a large-scale study described in “Will a Fat Tax Work?”, Professors Singh along with co-authors Kanishka Misra of the Ross School of Business at the University of Michigan and Romana Khan of Northwestern University, show that small price changes can shift people toward lower-fat alternatives and thus contribute to America’s battle against obesity.

The study analyzes six years of sales data for milk at more than 1,700 supermarkets across the US. Why study milk? The reason is the unique pricing pattern of milk observed in US. If you happen to live in certain areas (e.g., NYC or Boston), you see the same price of milk regardless of fat content. In other areas (e.g., Philadelphia or San Francisco), the price of milk increases with fat content—whole milk being the most expensive and skim milk being the cheapest. This gives the authors a quasi-experimental setup to show with empirical field data what had only been shown in lab experiments: the effectiveness of small price differences in altering behavior. In this case, a price difference of 10 percent – as little as 27 cents per gallon – leads to large increase in shares of lower-priced, lower-calorie options.

Importantly, the study shows that the shift to lower-priced, lower-calorie milk was particularly strong among low-income groups, who are the most price-sensitive and also most at risk for obesity. They point out that any tax on the higher-calorie alternative be imposed as an excise tax and thus reflected in the shelf price, not at checkout, so that it is salient in the consumer’s purchase decision.

The authors also point out that current retail pricing practices in the US offer little incentive to choose lower-calorie options because they are either priced the same or in some cases, such as baked versus regular potato chips, sold at a premium.  According to Professor Singh, “Our analysis supports the calls by health policy advocates and medical practitioners for the use of price-based instruments as a health policy tool to combat obesity.”