Thursday, December 31, 2009

Product labeling

An interesting article in the Baltimore Sun discusses the possibility of product labeling for caffeine--particularly for products to which caffeine is added.  As with any product labeling question, an issue that arises is how much it will cost manufacturers to include the information on their labeling, how much it will cost the government to enforce such labeling, and how much it will change consumers behavior.  Moreover, if consumers really demanded the information, why does it not emerge in the private market without government intervention?

Even if consumers would benefit, why hasn't this type of labeling emerged in a private market?  Each consumer would benefit a little.  It would cost the food and beverage manufacturers a lot.  Concentrated costs and diffuse benefits often lead to a lack of regulation as those facing costs have a much stronger incentive to lobby against a new regulation.

Why would consumers want the information?  The article does a good job of describing the facts that (1) some people are extra sensitive to the stimulant, (2) caffeine can accentuate attention deficit disorder, hyperactivity, and insomnia, (3) excessive caffeine may harm fetuses, and (4) a variety of other health effects may be related.

Do consumers understand all the effects?  There is no way to say, but given that at least some consumers seem to have a sufficiently difficult time with things like energy in and energy out needing to be similar so as not to gain weight, it is not clear that all consumers understand all implications.

Would it change consumers' behavior?  Again, there are lots of examples of when labeling has not seemed to change consumer behavior, but, for example, parents with children may be very interesting in limiting their caffeine intake and pay attention to the labeling and change their purchasing behavior.  That will affect the demand for some company's products.

Would educating consumers be enough?  Maybe.  Although that process could take a long time.  First, consumers would need to receive the information.  Then, consumers would need to incorporate the information into their decision making.  Then, consumers would need to demand the information on the labels.  Then, at least some companies would have to try it and find that it increases the demand for their products.  Then, other companies would have to follow.  From a decision maker's perspective, it would be important to assess how long this would take and how much consumers would eventually benefit with how much consumers would benefit if the information were available immediately and how much it would cost companies and the government to impose and comply with the regulation immediately.

No comments:

Post a Comment