A new paper by Bollinger, Leslie, and Sorenson studies Starbuck’s sales data to assess the effects of New York City’s mandatory calorie posting law. Here is the abstract:
We study the impact of mandatory calorie posting on consumers’ purchase decisions, using detailed
data from Starbucks. We find that average calories per transaction falls by 6%. The effect is almost
entirely related to changes in consumers’ food choices—there is almost no change in purchases of beverage calories. There is no impact on Starbucks profit on average, and for the subset of stores located close to their competitor Dunkin Donuts, the effect of calorie posting is actually to increase Starbucks revenue. Survey evidence and analysis of commuters suggest the mechanism for the effect is a combination of learning and salience.
And this bit caught my eye:
The competitive effect of calorie posting highlights the distinction between mandatory vs. voluntary posting. It is important to note that our analysis concerns a policy in which all chain restaurants, not just Starbucks, are required to post calorie information on their menus. Voluntary posting by a single chain would result in substantively different outcomes, especially with respect to competitive effects.
A natural response to these laws is that if it were in the interests of consumers, vendors would voluntarily post calorie counts. But if consumers are truly underestimating calories, then unilateral posting by a single competitor would backfire. Consumers would be shocked at the high calorie counts at Starbucks and go somewhere else where they assume the counts are lower.
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April 9, 2010 at 12:38 pm
Jacob
I think that’s oversimplified. In the actual competitive market that existed before these laws we saw that 1) many chains were posting nutritional information online or in in-store pamphlets and 2) many restaurants highlighting at least some of their healthier items on their menus. (Subway, for example, had signs advertising the calorie counts on their more health-oriented sandwiches). So the question is not whether these laws are an improvement over no information, but whether they improve on a market where information was provided in a targeted way to people who either take the time to look it up or seek out specifically healthy low-calorie dishes.
The assumption of studies like the one you cite is that all customers want calorie information and that reductions in calories of restaurant food is a good thing. But if some customers would rather indulge without being reminded of calorie counts or if the calorie reductions make the food taste worse, it’s not so clear this is an improvement.
April 9, 2010 at 2:32 pm
jeff
Jacob: I agree that these assumptions are taken for granted in most discussions of posting laws. I accept the first assumption because I find it hard to take seriously any argument that people don’t benefit from information. But I agree that it does not follow that people want fewer calories. Calorie counts can benefit people because it shows them what the “budget constraint” is and indeed they may use this to pick items that have more calories (I would not pay for low-calorie tiramisu for example.)
If you accept the first assumption then the bottom line is that *any* change in behavior that is induced by posting calorie counts is evidence that they are helping people make better choices.
April 9, 2010 at 2:43 pm
jeff
By the way Jacob, I bet you know the answer to this question. Why do menus in restaurants/bars list the prices of food, wine, and non-alcoholic beverages, but often leave out prices for cocktails?
Do people ever ask for these prices?
Do you think that people would like to know these prices?
I think that the answers must suggest something for the calorie-posting debate.
June 15, 2010 at 1:15 pm
twicker
FYI, Jacob, it seems that you’re assuming that people know whether or not they want the calorie information. However, even with the calorie information that both Starbucks and Dunkin’ Donuts already provided, people *still* changed their behavior. Thus, I’m not convinced that people knew they “wanted” the information. I suspect, instead, that once they had the information (“wanted” or not), they realized they *then* wanted to use that information. Prior to seeing the information, they didn’t know that they wanted it.
It’s much like the new credit card payoff information: everyone had the information available to tell them how long it would take to pay off a credit card if you keep making minimum payments, but it’s not nearly the same as if you see a statement that has both the total minimum-payment payoff pre-calculated, along with a comparison of “If you pay an extra $X, then you save $Y and pay it off in 3 years instead of 27.” The information was there; until presented by default, many people likely didn’t think about what it meant.
The NY law just changes the default to make it so that people don’t have to look for the information. Given that people *are* changing their behaviors based on having the information, and changing them to ingest fewer calories, and given our long-term problems with cardiological and endocrinological conditions, I don’t see how the previous default was better.
April 9, 2010 at 7:20 pm
Jacob
Hmm, that’s not something I’ve noticed, so I could only guess. I’ve seen some restaurants that charge the same price for all menu cocktails, but I can’t think of any where prices varied significantly and prices weren’t listed.
April 9, 2010 at 10:46 pm
jeff
Are you saying that you have never seen menus with no drink prices or are you saying that whenever drink prices are not listed they are all the same (unlisted) price?
In my experience it is a very common practice not to list any prices for cocktails. Fearing I was crazy, I did a quick Google search that confirmed I was not (anymore than yesterday):
http://www.google.com/search?q=no+drink+prices+on+menus&ie=utf-8&oe=utf-8&aq=t&rls=org.mozilla:en-US:official&client=firefox-a
April 10, 2010 at 1:50 am
Jacob
Well I’m sure you’re not crazy, but I can’t think of any place I’ve been to lately that doesn’t list drink prices, though there are many where the price is uniform and printed somewhere on the menu (“All cocktails $8” for example). Maybe it’s a regional thing?
June 15, 2010 at 1:03 pm
twicker
I can think of several bars I’ve been to that don’t list cocktail prices. Generally, I only see cocktail prices listed at restaurants that close at around 10 PM (i.e., places that don’t switch over to a late-night bar crowd); for the other bars, you generally only see prices for any drinks that are on special.
April 12, 2010 at 9:30 am
Posting calories at Starbucks | Canadian Agri Food
[…] Cheap Talk has an interesting post on mandatory calorie posting at Starbucks and similar chain restaurants. It based on a study by Bollinger et al. Here is the abstract: […]
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