Food Bank Donations and Retail Pricing

42 Pages Posted: 15 Dec 2020

See all articles by John Lowrey

John Lowrey

Ohio State University (OSU), Fisher College of Business

Timothy J. Richards

Arizona State University W. P. Carey School of Business

Stephen F. Hamilton

California State Polytechnic University, San Luis Obispo

Date Written: December 6, 2020

Abstract

Food banks are an important part of the food-retailing setting. In 2018, food banks delivered a total of 1.4 billion pounds of donated food to 51.4 million clients. Perhaps more importantly, food banks serve as an important outlet for food that would otherwise be discarded in land-fills, or composted. Despite the economic and social importance of food banks, we know very little of their economic role in food distribution. In this article, we explain the existence of food banks as an essential mechanism to the food-retailing function, permitting food retailers to price-discriminate between high-valuation consumers who visit their stores, and low-valuation consumers who do not. Donating to food banks allows retailers to avoid destructive promotions for fresh products, provide an outlet for over-ordering to prevent stock-outs, and generates valuable tax write-offs. We show how secondary markets for perishable food products improve profitability, and we test the implications of our model using a unique data set of perishable food sales. We find that retailers that take advantage of secondary markets are more profitable than those that do not. Our findings explain the co-existence of traditional food retailers, and food banks.

Keywords: Closed-loop supply chains, food banks, food retailing, food waste, price discrimination, secondary markets

JEL Classification: D43, L13, M31

Suggested Citation

Lowrey, John and Richards, Timothy J. and Hamilton, Stephen F., Food Bank Donations and Retail Pricing (December 6, 2020). Available at SSRN: https://ssrn.com/abstract=3743633 or http://dx.doi.org/10.2139/ssrn.3743633

John Lowrey

Ohio State University (OSU), Fisher College of Business ( email )

2100 Neil Avenue
Columbus, OH
United States
614-214-5088 (Phone)

Timothy J. Richards (Contact Author)

Arizona State University W. P. Carey School of Business ( email )

7231 E. Sonoran Arroyo Mall
Mesa, AZ 85212
United States
480-727-1148 (Phone)

HOME PAGE: http://www.east.asu.edu/msabr/faculty/richards.htm

Stephen F. Hamilton

California State Polytechnic University, San Luis Obispo ( email )

San Luis Obispo, CA 93407
United States
805-756-2555 (Phone)

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