“Imagine that someone gave you 300 million pounds of food and asked you to distribute it to the poor—through food banks—all across the United States. The nonprofit Feeding America faces this problem every year. The food in question is donated to Feeding America by manufacturers and distributors across the United States. As an example, a Walmart in Georgia could have 25,000 pounds of excess tinned fruit at one of its warehouses and give it to Feeding America to distribute to one of 210 regional food banks. How should this be accomplished [when the food cannot be sold to food banks]? ”
That's the opening paragraph of an article in the latest issue of the Journal of Economic Perspectives by Candice Prendergast. His answer to the question was to create a market to allocate the food while attempting to feed the most people and have some equity across food banks. He shows that there were myriad details and market design issues that had to be overcome, but the ultimate outcome appears to be wildly successful. He writes:
“Feeding America knew that its previous system of offering the same amount, and kind of food, to food bank clients might not be optimal, but it did not have the hard information to design a better system. Indeed, given the information that Feeding America had available with the queuing system, it is likely that offering everyone the same thing was close to the best option. The Choice System has allowed the participants to match outcomes to their preferences more effectively. Auctions have revealed willingness to pay for different kinds of food (who would have guessed that one pound of cereal was worth almost 50 pounds of produce?), which has allowed food banks to sort more efficiently on the quality–quantity dimension. In this way, the market system has allowed gains not possible with centralized assignment.”
For those wanting to learn more, a couple years ago, Prendergast was on the Econ Talk podcast with Russ Roberts discussing these markets.