Fast Food, Addiction, and Market Power

Many attribute the rise in obesity since the early 1980's to the overconsumption of fast food. A dynamic model of a different-product industry equilibrium shows that a firm with market power will price below marginal cost in a steady-state equilibrium. A spatial hedonic pricing model is used to test whether fast food firms set prices in order to exploit their inherent addictiveness. The results show that firms price products dense in addictive nutrients below marginal cost, but price products high in nonaddictive nutrients higher than would be the case in perfect competition.


Issue Date:
2007-12
Publication Type:
Journal Article
PURL Identifier:
http://purl.umn.edu/7077
Published in:
Journal of Agricultural and Resource Economics, Volume 32, Number 3
Page range:
425-447
Total Pages:
23




 Record created 2017-04-01, last modified 2017-08-23

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