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Abstract Cost/benefit analysis justifies regulations altering the amount of health‐related information presented to consumers. The current method of benefit analysis, the cost of avoided illness, is limited; it assumes the benefits of health‐related information are adequately represented by changes in illnesses. The manuscript develops a benefit estimation method to measure the welfare impacts of providing nutrient information. Nutrient labeling significantly affects purchase behaviour but may not lead to increased consumption of health foods. Nutrient labeling may increase welfare without any change in health risk. Thus, the cost of avoided illness approach can underestimate the social benefits of providing nutrient information.
Teisl et al. (2001) studied this question.