Inequity in Disaster Operations Management

Abstract

Problem Definition: Responding to natural disasters requires the deployment of food, shelter, and medical assistance to relieve the immediate needs of the victims. These services are supported by, and eventually fully transitioned to, local infrastructure, such as grocery stores. Low-income communities may bear a disproportionate burden from these disasters due to disparities in local infrastructure and services. We test for differences in the percentage change in prices paid for grocery products between low-income and high-income communities in the months following three large Atlantic hurricanes. Academic/Practical Relevance: Product pricing, stockouts, and stockout-based substitutions represent broad and deep areas of research in operations management. This research often focuses on settings with well-defined, random demand. We contribute to this literature by providing empirical evidence of heterogeneous, stockout-based substitution in settings with large, sharp shocks to supply and demand. Our findings are also important for operations managers and policy-makers that seek to more equitably serve communities that are affected by natural disasters. Methodology: We identify impacted communities using major disaster declarations by the United States federal government, and marry this information to U.S. Census Bureau data on household income, and third-party data on grocery store sales. Using a triple-difference regression specification, we isolate the percentage change in prices paid by low-income versus high-income communities in disaster affected versus unaffected areas, before and after the disasters. Results: Across the events we study, we find that low-income communities in the disaster zones endure higher average percentage price increases within grocery categories compared to high-income communities. We establish the presence of several mechanisms that contribute to this outcome. Compared to high-income communities, low-income communities can experience a larger percentage drop in price promotions, higher percent price increases at the product level, more frequent stockouts, and a larger increase in substitution from low-priced products to high-priced products. Managerial Implications: Our findings can inform private and public sector responses to disasters, such as pricing and promotions, prepositioning target goods, strategic overstocking, and structuring cash-and-voucher (C&V) programs that anticipate the disaster-induced substitution patterns of different community types.

Keywords: disaster operations, humanitarian operations, product substitution, social equity