Hayley H. Chouinard

Fat Taxes: Big Money for Small Change

In an attempt to improve the nations health, many U.S. policy makers have or are considering imposing taxes on the fat in food. Dairy products constitute a large portion of at home fat consumption of particularly harmful types of fat, and nearly all U.S. households consume these products. We estimate a demand system for dairy products, which we use to simulate substitution effects among dairy products and the welfare impacts of fat taxes on various consumer groups. We find that even a 10 percent ad valorem tax on the percentage of fat would reduce fat consumption by less than a percentage point. Given that the demand for most dairy products is inelastic, a fat tax is an effective means to raise revenue. However, these fat taxes are unattractive because they are extremely regressive, and the elderly and poor suffer much greater welfare losses from the taxes than do younger and richer consumers.

Will Farmers Trade Profits for Stewardship? Heterogeneous Motivations for Farm Practice Selection

We investigate the trade-off agricultural producers face between profits and stewardly activities when selecting farm practices. Instead of the profit-maximization framework, we model producer behavior in an expanded utility framework, built on production technology, and including two utility components: self and social interests. The framework introduces inherent heterogeneity and social/environmental motivations into farmer behavior. Based on this model, we hypothesize that there are farmers that are willing to forego some profit to engage in stewardly farm practices. With an empirical study, we provide evidence that some farmers are willing to make this sacrifice. Results are consistent with the multi-utility hypothesis. (JEL Q12, Q24)

Identifying consumer preferences for nutrition information on grocery store shelf labels

Nutrition labels can potentially benefit consumers by increasing product knowledge and reducing search costs. However, the global increase in obesity rates leads one to question the effectiveness of current nutrition information formats. Alternative formats for providing nutrition information may be more effective. Shoppers at a major grocery chain participated in choice experiments designed to identify preferences for nutrition information provided on grocery store shelf labels. Shoppers demonstrate a strong affinity for shelf label nutrition information and the presentation of the nutrition information significantly affects their preferences as well. Several demographic variables help to explain differences in preferences.

Consumer Preferences for Detailed versus Summary Formats of Nutrition Information on Grocery Store Shelf Labels

The health-related problems caused by poor diet choices has elevated the policy importance of how to communicate nutrition information more effectively to consumers at the point of purchase. At the same time, food retailers want to provide their customers with nutrition information in the format their shoppers prefer. The shopping environment, which includes the provision of nutrition information, is a way that food retailers can differentiate themselves from the competition. In this article, we present a simple model of the demand for nutrition information and empirically evaluate consumer preferences for two different formats. We compare nutrition information on grocery store shelf labels in the Greater San Francisco Area presented in detailed and summary formats. The detailed nutrition information provides an explicit description of specific nutrients but may be more costly to process and difficult to understand. Summary nutrition information reduces processing effort but provides a condensed description of nutritional content. The results indicate that there are higher mean preferences for detailed nutrition labels but also a greater dispersion of preferences. Nutrition-conscious consumers are more likely to prefer detailed information. The summary format may benefit shoppers who are less likely to use other forms of information.

Split-Estate Negotiations: The Case of Coal-Bed Methane

Coal-bed methane is an emerging contributor to the US energy supply. Split estates, where landowners control the surface and the energy companies lease the rights to the underground gas from the federal government, often impede successful negotiations for methane extraction. We provide an extensive form representation of the dynamic game of the negotiation process for subsurface access. We then solve for a set of Nash equilibrium outcomes associated with the split estate negotiations. By examining the optimal offers we can identify methods to improve the likelihood of negotiations that do not break down and result in the gas developer resorting to the use of a bond. We examine how changes in transaction costs or entitlements will affect the outcomes, and support our finds with anecdotal evidence from actual negotiations for coal-bed methane access.

Auctions with and without the Right of First Refusal and National Park Service Concession Contracts

The National Park Service has struggled to improve the quality of service provided by concessioners for decades. To address these concerns, the Park Service eliminated the right of first refusal from the largest revenue-generating concession contract auctions beginning in 2000. This article provides models of concession contract auctions with and without the right of first refusal. The optimal bidding strategies and expected level of service are found. The results confirm the auction without the right of first refusal leads to bids that include a higher level of service.

Making Friends to Influence Others: Entry and Contribution Decisions That Affect Social Capital in an Association

We examine factors affecting entry and contribution to an association that provides different goods using social capital formed by heterogeneous firms in a political economy environment. We model and solve a game that explains investments to form social capital within associations and determine the effect on the intensive and extensive marginal contributions to the association related to the government’s susceptibility to influence. Association products such as capital goods for members or lobbying the government to influence regulation affect membership and contribution decisions. Government influenceability also affects the decision to contribute to social capital, but it varies with agent productivity and association output. Often, an increase in government influenceability increases social capital in associations composed of high productivity agents because they prefer to influence policy while low productivity agents focus on production.

Waiting for the Invisible Hand: Market Power and Endogenous Information in the Modern Market for Food

In many ways, the modern market for food exemplifies the economist’s conception of perfect competition, with many buyers, many sellers, and a robust and dynamic marketplace. But over the course of the last century, the U.S. has witnessed a dramatic shift away from traditional diets and toward a diet comprised primarily of processed brand-name foods with deleterious long-term health effects. This, in turn, has generated increasingly urgent calls for policy interventions aimed at improving the quality of the American diet. In this paper, we ask whether the current state of affairs represents a market failure, and—if so—what might be done about it. We review evidence that most of the nutritional deficiencies associated with today’s processed foods were unknown to nutrition science at the time these products were introduced, promoted, and adopted by American consumers. Today more is known about the nutritional implications of various processing technologies, but a number of forces—including consumer habits, costly information, and the market power associated with both existing brands and scale economies—are working in concert to maintain the status quo. We argue that while the current brand-based industrial food system (adopted and maintained historically as a means of preventing competition from small producers) has its advantages, the time may have come to consider expanding the system of quality grading employed in commodity markets into the retail market for food.