Competing with fad products: erroneous health beliefs and market outcomes

Abstract We study how erroneous nutrition assumptions affect manufacturers’ profits and consumer surplus the government could intervene to improve welfare. In our model, two manufacturers produce a conventional product fad version misperceived bring health benefits. compare laissez-faire outcome outcomes: one without false beliefs other with information provision reducing belief’s prevalence. find that about benefits of products lower total welfare under some conditions. Information generally increases welfare, but, in situations, this occurs at expense surplus.