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Antoñanzas and Rodríguez-Ibeas Health Economics Review 2011, 1:4

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Antoñanzas and Rodríguez-Ibeas Health Economics Review 2011, 1:4 http://www.healtheconomicsreview.com/content/1/1/4 RESEARCH Open Access Healthy vs. unhealthy food: a strategic choice for firms and consumers Fernando Antoñanzas* and Roberto Rodríguez-Ibeas Abstract In this paper, we carry out a theoretical analysis of the strategic choice made by firms regarding the type of food they market when they face consumers who care about the healthy/unhealthy attributes of the product but incur in emotional/health costs when the food they consume has unhealthy attributes. We consider a two-stage game. In the first stage, one of the firms chooses the unhealthy content of its product. In the second stage, both firms simultaneously. | Antonanzas and Rodriguez-Ibeas Health Economics Review 2011 1 4 http www.healtheconomicsreview.eom content 1 1 4 o Health Economics Review a SpringerOpen Journal RESEARCH Open Access Healthy vs. unhealthy food a strategic choice for firms and consumers Fernando Antonanzas and Roberto Rodriguez-Ibeas Abstract In this paper we carry out a theoretical analysis of the strategic choice made by firms regarding the type of food they market when they face consumers who care about the healthy unhealthy attributes of the product but incur in emotional health costs when the food they consume has unhealthy attributes. We consider a two-stage game. In the first stage one of the firms chooses the unhealthy content of its product. In the second stage both firms simultaneously decide their prices. We find that depending on the parameters of the model product differentiation can be maximal or less than maximal. The firm that produces the unhealthy food charges a higher price and obtains a larger share of the market unless the emotional health costs and the unhealthy food production costs are relatively high. We also find that educational campaigns will not always reduce the demand for the unhealthy food or the degree of the unhealthy attribute. JEL Classification I10 I18 L11 Keywords Healthy food Unhealthy food Obesity Educational campaigns Background A growing proportion of the food we eat is produced by industrial processes that combine a main ingredient with other ingredients to make the final product better looking and better tasting. Likewise these procedures add value to the final product. For instance flour is the main ingredient of bread which for many generations was one of the basic foods for breakfast and snacks however bread has a relative low added value compared to croissants donuts cakes cookies brownies and the like which are nowadays commonly eaten. Flour is also an ingredient of these products although its proportion is lower than that found in plain bread. As a .