Impact of pricing policy on consumption inconclusive says Dutch government report

The following is the abstract of a study produced by the National Institute of Public Health and the Environment in the Netherlands – under the remit of the Ministry of Health, Welfare and Sport. The study concludes that it is not yet possible to predict the effect of pricing policies on total food consumption, and illustrates the complexity of consumer behaviour and buying habits, when combined with aspects such as price elasticity.

As yet, it is not possible to predict the effect of pricing policies on total food consumption. Data that account for unexpected side effects are scarce. For example, lowering the price of fruits does not by definition increase fruit consumption, but may lead to an increase of sales of another, unhealthy, product. Taxing “unhealthy” products and/or providing subsidies on “healthy” products are often mentioned as ways to exert a positive influence on dietary intake.

The research described in this report is based on three investigations. Firstly, a review of the literature shows that little is known about the effectiveness of these kind of measures. Furthermore the literature showed that consumers do, indeed, consider price an important determinant in choosing which products to buy.

Secondly, results from the MARGARIN-study among a small group of residents living in the eastern part of the province of Groningen, demonstrated that other factors, e.g. tastiness, are associated with the actual amounts of fruits, vegetables and fish consumed. Thirdly, information on price elasticities of a number of foods (crisps, soft drinks, meat, fruit, vegetables) also suggested that their purchase is only moderately influenced by their own price.

Price elasticities were both drawn from the literature and calculated from data on purchases by 4,400 Dutch households. When calculating the price elasticities, cross elasticities were not accounted for. Proper data on price elasticity of products in the Netherlands are scarce. Such data are necessary, however, if reliable estimates of the health effects of pricing policies are to be made.

You can access the full report here.