As a fan of free markets, I recognize that sometimes intelligent government regulations (not always an oxymoron!) can improve markets by requiring companies to provide consumers with information that will help them make better choices. Informed consumers, after all, are a central ingredient of a successful free market. That’s why even most libertarians support regulations that ban fraudulent advertising.
That’s also why, at first glance, the federal government seemed to be promoting better markets when it passed rules requiring chain restaurants to post calorie counts next to their menu items. Research has shown that many consumers are horribly uninformed about the number of calories in most menu options, often significantly underestimating the amount in their favorite meals. Calorie count information should help these consumers make more informed, and therefore better, decisions.
But recent push-back from groups like pizza companies raises important questions about the proper size and scope of such regulations. More importantly, this controversy should remind all of us that, when debating government regulations, we should be humble, because it is often difficult to set a proper balance between helping consumers while at the same time allowing businesses to prosper.
To understand the push-back, it helps to take a guess – your best shot – at estimating the number of calories in a large Little Caesars pizza.
Stumped? You should be. There is no right answer to this question, because there is no such thing as a generic large Little Caesars pizza. Instead, there are hundreds of possible large pizzas one could buy from this company – cheese pizzas, pepperoni and sausage pizzas, mushroom green pepper and extra sauce pizzas . . . you get the idea. The number of calories in a large Little Caesars pizza depends on how many toppings consumers choose to put on top of their pies. This variability makes it hard for Little Caesars to post calorie counts on its menu.
We performed three related field experiments at a single fast-food restaurant to determine whether these reported sentiments could be translated into a strategy to alter calorie consumption. All of the experiments addressed three important elements of eating behavior.
First, do people spontaneously request smaller portions—that is, even if smaller portions are not specifically noted as an option on a menu or signage? Second, do people accept explicit spoken offers to take smaller portions in order to reduce calories? Third, does taking a smaller portion of one meal component lead to indulgence in other meal components, so that the calorie “savings” from downsizing are immediately lost?
Each experiment addressed an additional question. In experiment 1, we explored whether offering a nominal (twenty-five-cent) discount for downsizing would result in more customers’ accepting the offer than offering no discount. In experiment 2, we examined whether offering an opportunity to accept a smaller portion would be more effective than providing calorie labels in encouraging moderation. In experiment 3, we investigated whether downsizing appealed only to customers who would otherwise have thrown away uneaten food, thereby affecting calories ordered but not calories consumed.
Let’s start with experiment 1. First, they measured how many customers would spontaneously request a smaller portion of a high-calorie, high-starch side dish. Not surprisingly, only 1% did. But if customers were asked, on the other hand, one third accepted the offer, regardless of whether a discount was offered. What’s more, those that did downsize did not compensate by up-sizing any other portions of the meal. Those that downsized ordered significantly fewer calories, 100 fewer on average. Continue reading…