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The Economics of Information, Deep Capture, and the Obesity Debate
Author(s) -
Smith Trenton G.,
Tasnádi Attila
Publication year - 2014
Publication title -
american journal of agricultural economics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.949
H-Index - 111
eISSN - 1467-8276
pISSN - 0002-9092
DOI - 10.1093/ajae/aat113
Subject(s) - product (mathematics) , relevance (law) , quality (philosophy) , perception , competition (biology) , phenomenon , imperfect , affect (linguistics) , information economics , marketing , economics , industrial organization , institution , dissemination , business , microeconomics , advertising , public economics , political science , psychology , law , ecology , philosophy , linguistics , physics , geometry , mathematics , communication , epistemology , quantum mechanics , neuroscience , biology
The economic theory of regulatory capture predicts that industry groups will attempt to influence their regulators (for example, by lobbying for rules that exclude competition). It has been suggested that the same logic applies to any powerful institution with the ability to affect industry profits. When the aim of industry is to alter the public's perception of its product (for example, by disseminating favorable messages to the news media or via an advertising campaign, or by funding industry‐friendly scientific research), the end result has been dubbed deep capture. We develop a formal model of deep capture, in which consumers have imperfect information about product quality, and a dominant producer is able to increase his profits by altering the parameters of the consumer's search problem. We demonstrate the empirical relevance of the phenomenon with a discussion of the food industry response to the obesity epidemic.