Friday, February 26, 2010

Posting calories in restaurants is Pareto improving

With increasing frequency, it is proposed that restaurants should post on their menus nutritional information. The restaurants resist this because they think it may shoo customers away, or at least make them eat less (assuming they underestimated the calories, which may not be always true). But if they eat less, why not make portions smaller and thus reduce costs and possibly increase profits?

Bryan Bollinger, Phillip Leslie and Alan Sorensen observed Starbucks outlets in New York City as such a calorie posting policy was implemented. They got data about each transaction in a NYC outlet for a 14-month period, including 11 months with calorie postings, as well as in Boston and Philadelphia, which act as control groups. They finding that the posting reduced calories per transaction by 14 units, 10 coming from fewer purchases and 4 from switching to a lower calorie item. You may think this would be bad for Starbucks? Think again, there was no significant change in revenue, in fact there was even a 3% increase for Starbucks outlets close to Dunkin Donuts: the calorie posting attracted clients from competitors.

2 comments:

Brad said...

Yeah, it seems that knowing the number of calories has a negligible effect on food selection. There was an article in the times in October about how people actually ate more fastfood when the nutritional information was posted.

Calorie Postings Don’t Change Habits, Study Finds

Min said...

At the start of the Great Recession, a number of local eateries cut back on portion size. I think that that was general enough so that they did not lose business to competitors. But would they have been able to do so in normal times? By contrast, the gradual increase in portion size in previous years was probably an arms race. If it produced waste, that was OK as long as the customers paid the price.