Product Bundling in Fast Food Advertisements and the Relationship with Consumers' Willingness to Pay

Obesity rates have been rapidly increasing in recent years. This is a problem especially for low-income families and for households without access to quality food. Consequently fast food restaurants are a solution for those who cannot afford healthy food. The large number and variety of fast food restaurants coupled with their aggressive advertisements cheap prices and large portions may have an effect on consumption and obesity rates. This study explored the relationship between types of advertisements utilized by fast food restaurants and consumers' willingness to pay (WTP) to see if bundled advertisements have a significant impact on WTP. Bundles also referred to as value meals combine two or more products which are sold at a lower price than the individual prices combined. Using a between subjects study a Becker DeGroot Marshak (BDM) bidding auction was conducted to elicit participants WTP for three different items a drink fries and a burger which were advertised individually or in a bundle. I hypothesized that consumers would be willing to spend more on individually advertised items than the same items advertised in a bundle. I found that consumers were indeed willing to pay significantly more for items sold individually than in a bundle. These results suggest that consumers see purchasing bundles as a gain rather than a loss increasing the overall perceived value of the bundle and decreasing the perceived cost.

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