How to Prevent Retailers from Gouging, Harming Refugees and their Host Communities
New Manufacturing & Service Operations Management Study Key Takeaways:
- If a humanitarian organization (HO) provides cash assistance without considering the retailer’s market power, the HO will inadvertently harm the refugees and residents.
- By partnering with local governments, HO’s can extend cash assistance to settings with market power and curb gouging.
- The partnership should adopt a price-dependent cash assistance policy that restores the distorted incentive due to the introduction of cash assistance allowing refugees to meet their individual needs, retailers to sell more products (and make at least the same profit as before), while residents benefit from lower prices.
BALTIMORE, MD, March 21, 2022 –The recent crisis in Ukraine is reigniting the discussion of the appropriate mix of assistance for refugees. According to the UN Refugee Agency, six million refugees already lived in camps in 2021 due to multiple armed conflicts worldwide. Humanitarian organizations (HOs) are working to help people struggling because of regulations that impede integration into host countries. Cash assistance is one way that HOs are helping in addition to providing in-kind assistance in the form of food and non-food items. The intention of the cash assistance is to provide refugees with spending flexibility, restore their dignity and improve the wealth of the host community. However, cash assistance brings its own challenges. New research in the INFORMS journal Manufacturing & Service Operations Management identifies a way to provide incentives for the retailer to voluntarily reduce prices while causing no harm to refugees or host communities.
“We recommend HOs and local governments partner to adopt a price-dependent cash assistance (PDCA) policy that restores the distorted incentive due to the introduction of cash assistance. In doing this, refugees gain the power of meeting their individual needs while retailers sell more products (and makes at least the same profit as before) and residents enjoy lower prices,” says Telesilla Kotsi, one of the study’s authors, a professor at The Ohio State University Fisher College of Business.
Prior research has shown that cash assistance by HOs can be exploited by local retailers’ market power in rural settings, which challenges the mission of HOs to help refugees while doing no harm to host communities.
The study, “Donations for Refugee Crises: In-kind vs. Cash Assistance,” conducted by Kotsi, alongside Owen Wu and Alfonso Pedraza-Martinez, both of Indiana University, looked at three refugee camps in northwestern Greece.
“A PDCA policy aligns the incentives between the retailer and the HO-government partnership. This new policy for cash assistance acts as a lever for the retailer to voluntarily set desirable prices, which benefits both refugees and their host community,” says Wu, a professor in the Kelley School of Business. “It’s important for HOs to demonstrate to the local governments that there are economic benefits of welcoming refugees into communities.”
This implementable policy can guide HOs to improve their budget allocation for assistance for refugees living in areas where local market power exists.
“If an HO provides cash assistance without considering the retailer’s market power, the HO will inadvertently harm the refugees and residents. Our policy provides a rare win-win-win,” concludes Pedraza-Martinez, a professor in the Kelley School of Business.
The authors look forward to connecting to the HOs involved in assisting Ukrainian refugees to discuss possible challenges in managing supply chains and allocating assistance between in-kind and cash payments for Ukrainian refugees.
“Despite the research opportunity from the emerging crisis, we hope that peace will prevail around the world and our research will no longer be needed,” the authors finally remarked.
About INFORMS and Manufacturing & Service Operations Management
INFORMS is the leading international association for operations research and analytics professionals. Manufacturing & Service Operations Management, one of 17 journals published by INFORMS, is a premier academic journal that covers the production and operations management of goods and services including technology management, productivity and quality management, product development, cross-functional coordination and practice-based research. More information is available at www.informs.org or @informs.
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