The Impact of Voluntary Labeling

Abstract

Policymakers have mandated food labeling standards, for example, through the Nutrition Labeling and Education Act. However, many claims made by firms are voluntary, such as when they label products as containing “low calories” and “no high-fructose corn syrup (HFCS).” This paper examines whether the use of voluntary labels can help consumers make more informed choices, or if labels lead consumers to ignore other relevant product characteristics, resulting in choices that can be harmful. With theory providing both types of predictions, we empirically analyze firm- and consumer-side behavior, focusing on the specific case of the “no HFCS” label and the corresponding sugar content – an increasingly policy-relevant product characteristic – of such products. We first document common firm practices in the industry across various product categories where the use of the label is prevalent. We then examine consumer search and purchase behavior through an incentive-aligned experiment. We find that products with the “no HFCS” label are less healthy, containing more sugars, than others, and that certain subsets of consumers search less and buy nutritionally worse products in the presence of voluntary labels. Our findings inform both managers and policy makers about whether and how voluntary labels should be displayed.

Keywords: Public policy, Experimental design, Consumer behavior