Unhealthy food, regulations, and consumer welfare: The US microwaveable popcorn market

Abstract

Due to significant health concerns, governments across the world have taken measures to regulate dietary trans fat, for example, through bans and ad-valorem taxes. We assess the effectiveness of these two strategies and measure their ensuing welfare implications. We estimate a structural demand and supply model for the microwavable popcorn market using NielsenIQ Homescan data. Applying the recovered consumer preferences and marginal costs, we find a ban and a 35% tax result in similar levels of welfare loss and trans fat reduction. A 10% tax can still significantly reduce trans fat consumption (around 48%), while the associated consumer welfare loss is substantially smaller.