Reducing Nutritional Disparities Through Targeted Pricing: Evidence from a Large Restaurant Chain

Nutritional disparities across socioeconomic groups contribute to health inequality in the U.S. This paper studies the role of heterogeneous consumer preferences in food choices and explores pricing policies that can promote healthier eating among disadvantaged consumers. Using detailed transaction-level data from a large fast-food restaurant chain, we show that consumers in disadvantaged neighborhoods tend to choose less healthy, higher-calorie items. We estimate a mixed logit discrete choice model to identify consumer preference heterogeneity across demographic groups. Lower-SES consumers display higher price sensitivity across items with varying nutritional quality and show flexibility in substituting between healthy and less healthy options. Counterfactual simulations show that modest, targeted price adjustments in disadvantaged neighborhoods can be an effective tool to reduce nutritional disparities across neighborhoods, with little impact on restaurant revenue or profits.