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

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  • Robert Evan Sanders

    (University of California, Rady School of Management, La Jolla, California 92093)

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.

Suggested Citation

  • Robert Evan Sanders, 2024. "Dynamic Pricing and Organic Waste Bans: A Study of Grocery Retailers’ Incentives to Reduce Food Waste," Marketing Science, INFORMS, vol. 43(2), pages 289-316, March.
    • Handle: RePEc:inm:ormksc:v:43:y:2024:i:2:p:289-316
    DOI: 10.1287/mksc.2020.0214
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