Matthew Metzgar, M.B.A., Ph.D. presenting at the 2nd annual Ancestral Health Symposium (AHS12).
Of the thousands of food commercials that children see every year, less than 1% are commercials for fruits and vegetables. This large differential in advertising follows from the different economic structure of the markets.
Simple commodity foods, such as fruits and vegetables, are relatively similar and can be modeled as a perfectly competitive market. Processed foods with their many manufacturer variations are modeled as monopolistic competition. Economic theory predicts that little advertising takes place under perfect competition, while heavy advertising takes place under monopolistic competition. Analysis of food commercials shows just this trend.
Advertisement of processed foods increased demand and consumption. This consumption has helped contribute to a worldwide expansion in obesity. This paper simulates how a complete ban on food advertising would affect social welfare. An advertising ban would reduce producer surplus within the processed food market, but the resulting lowered consumption of processed foods may reduce public health care expenditures. A microeconomic analysis is presented that details the predicted changes in food consumption patterns, obesity, and health care expenses from a ban on food advertising.
Matthew Metzgar, Ph.D., is a Clinical Assistant Professor of Economics at the University of North Carolina Charlotte. He has recently published on the feasibility of the Paleo diet for low-income consumers, and on the negative impacts of grains on population subgroups.