Consumers may falsely believe that plant-based milk alternatives (PBMAs) contain dairy, which can lead to mistakes in purchasing decisions. This confusion affects competition between dairy and PBMA markets, consumer welfare, and potentially public health. In response, governments worldwide are considering regulations restricting the word "milk" on PBMA labels. However, the consequences of such regulations remain unclear. This paper evaluates the effects of PBMA labeling policies in the U.S. by developing a discrete choice model that accounts for consumer confusion. Based primarily on Nielsen household scanner data, I estimate the model and conduct counterfactual analyses. The results reveal that requiring PBMAs labeled with "milk" to include a clarifying "non-dairy" label increases consumers' choice probabilities for PBMAs while reducing those for dairy milk. Additionally, consumer welfare improves under this policy. These findings suggest that the policy, initially supported by dairy milk producers concerned about PBMA imitation and market share loss, may inadvertently reduce dairy milk’s market share. This outcome reflects the benefits of product differentiation for PBMAs.
How Does Limited Consideration Change over Time?
This paper relaxes the assumption in the traditional discrete models that all available products are considered. The new perspective is empirically analyzing the limited consideration models with the time dimension. Specifically, I explicitly allow time to affect consideration probability parameters, not only by time-varying product characteristics or consumer demographics. I use Nielsen scanner panel data (2015-2018) to investigate how limited consideration change over time. The results show that different years may influence the effect of price and coupon on consideration probabilities.