There’s a nice headline in the Times today:Make us sell healthy food, supermarkets implore May.This invites the obvious reply: if you want to sell healthy food, why don’t you just do so?
The answer lies in competitive pressures. If any individual supermarket tries to cut salt in its products or refrains from special offers on unhealthy foods, it would lose market share to rivals.
Each individual supermarket’s rational attempts to maximize profits thus leads to an outcome which none of them really wants – the over-marketing of unhealthy food. This is an example of an arms race, a process whereby individually rational behaviour has results which are collectively undesirable. Here are some other examples:….Stumbling and Mumbling
On arms races
Chris Dillow | Investors Chronicle