Dynamic Pricing and Organic Waste Bans: A Study of Grocery Retailers’ Incentives to Reduce Food Waste

Robert Evan Sanders ()
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Robert Evan Sanders: University of California, Rady School of Management, La Jolla, California 92093

Marketing Science, 2024, vol. 43, issue 2, 289-316

Abstract: I analyze the welfare effects of two potential solutions to excess grocery-retail food waste: dynamic pricing and organic waste landfill bans. I use a structural econometric model with sales, perishability, and marginal cost data from a grocery chain’s artisanal bread category. My analysis of these counterfactuals shows that dynamic pricing Pareto-dominates an organic waste ban: Dynamic pricing reduces waste by 21% while increasing the chain’s gross margins and consumer surplus by 3% and 0.3%, respectively. In contrast, an organic waste ban, simulated by a ten-fold increase in disposal costs, reduces waste by only 4% and decreases profits and consumer surplus. Therefore, if regulators want to reduce grocery-store waste, they should incentivize chains to adopt dynamic pricing over imposing organic waste bans.

Keywords: dynamic pricing; environmental externality; food waste; organic waste ban; mandatory recycling program; unit-based pricing (search for similar items in EconPapers)
Date: 2024
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Citations: View citations in EconPapers (2)

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Persistent link: https://EconPapers.repec.org/RePEc:inm:ormksc:v:43:y:2024:i:2:p:289-316

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