Can data-driven price-discount policies help in reducing malnutrition?

*Unassigned quotes attributable to Alp Sungu

Malnutrition costs the global economy close to $5.5 trillion dollars each year and is the cause of more than half of all deaths of children under five. These staggering figures are not the result of new research, but rather a growing concern in many developing countries. Alp Sungu, a PhD student at London Business School, hopes to find a way to reduce malnutrition’s prominence through incentive structuring. With his two co-authors, Ali Aouad and Kamalini Ramdas, respectively Assistant Professor and Professor of Management Science and Operations at LBS, he is developing a way to leverage data, through the combination with randomized control trials, to inform decision makers on the most effective ways to price-discount goods. More specifically, through an algorithmic framework, he aims to provide nutrition-targeted, price-discount programs. Alp’s research is at the intersection of an increasingly relevant economic and social challenge and was awarded funding from the Wheeler Institute during our biannual call for proposals.

In his conversation with Tanisha Garg, an MBA 2021, and the co-president of the LBS Healthcare Club, he lays out what he thinks is an ever more practical method of increasing the quantity and quality of nutrients that people living in underprivileged communities consume. His goal, ultimately, is to achieve better nutritional outcomes, without changing the food subsidy budget allocation per household.

Setting the baseline: understanding malnutrition

Could you speak… on what exactly is the problem that you are trying to tackle…?”

Tanisha Garg

“It’s a very interesting phenomenon called South Asian Enigma …what research has been showing is, taking Africa as a benchmark, in the last thirty years South Asia economies are rapidly improving, but this economic improvement has not equally translated itself into nutritional outcomes… In other words…there are some people who are getting richer, but not proportionally healthier”

– Alp Sungu

What is clear from Alp’s research, and that of others in the realm of emerging markets, is that in South East Asia, the lack of food is not the only cause of the severity of the malnutrition, it is also the type of food that is being consumed. He is deliberate in highlighting that there is still a severe lack of food in many parts of the developing world, and provides a contrast with Africa, where the problem is low caloric intake, and the United States, where the problem is over nutrition. Alp highlights that if the problem was simply that people did not have the means to afford food, or there was food scarcity, such as is the case in Africa, then the focus should be on economic development more generally, not malnutrition, as it would work to solve many similar problems simultaneously.

South East Asia, he says, suffers from a problem called ‘hidden hunger’ where people suffer from a lack of certain essential vitamins and minerals. The problem for policy makers then, like those that Alp aims to arm with insights, is not the production of more food, but rather nudging citizens to consume the right mix of nutrients.

Changing the incentive structure: tweaking consumer behaviour

“If you want to increase calcium intake, one idea will say, “Hey, you know what? You should increase milk because it’s full of calcium.” But I think in these environments, you might be a little bit more careful because if you make milk more attractive, you might see people consuming less of cheese, less of yogurt. This is a particular problem.”

Subsiding food in South East Asia is not new, and can come in the form of cash, vouchers, or food itself. Often the aim is to incentive people to consume more of a certain type of nutrient. The argument put forward by Alp is that it is not as simple as decreasing or increasing the cost of individual goods. The policy decisions should be surgical and backed by data. Understanding the complex consumer behaviours that are inherently intertwined with price (and therefore food subsidies) requires a detailed look at how people shop, the combinations of goods purchased, and a holistic perspective behind consumption.

Leveraging data: providing recommendations through algorithms

“We try to design an algorithm that answers a very simple question, which products we should subsidize, and by how much we should discount in order to more efficiently and effectively improve nutrition in these communities”

So, what does a data-driven solution to malnutrition look like? Tanisha asks. Alp compares the concept to the data collection efforts of large software giants, who aim to use that data to recommend tailored advertising. He says it is a similar type of leveraged effort, but more focused on the price elasticity of demand for common grocery goods containing the target nutrients, rather than which advertisements to display.

“Our algorithm will say, “If you have $5 that you want to allocate for an individual’s food subsidy… reduce the price of meat by $2, reduce the milk price by $1 and reduce the chicken, or almonds by $2.” And based on our shopping model, based on our understanding about these consumption patterns, this portfolio of discounts should be the one… that most effectively optimizes for your nutrition goals. Our end goal is to create a decision support tool that helps policy providers to use in these environments.”

After Tanisha inquires about other potential uses of such a framework, Alp goes on to underscore the idea that although this research is focused on malnutrition, the algorithm could potentially be applied to a variety of development problems. Because the core concept revolves around optimization, such a tool is widely relevant. A second order benefit could come in the form of improved business processes for micro-entrepreneurs. Alp suggests this could result in a win-win scenario if collaboration is closely monitored.

However, tweaking the algorithm is tricky given the amount of research and data that will be required to provide accurate testing and timely recommendations.

Sharpening the focus: challenges on the path to insights

I’d be really interested to hear what some of the challenges you might have faced when you’re conducting your research and whether you had the opportunity to actually be on the ground in person and experience that?

Tanisha Garg

“There are many challenges ahead of us… when we meet all the [Covid] safety benchmarks, I’m very much looking forward to going back on the ground. But I think from our pilot studies…doing field research on the ground, at least in my experience in a slum community in India, trust is a major barrier. It’s not only you go and you ask people questions, you also need to establish local connections network with the local stakeholders.”

Alp Sungu

Given the environment in which Alp is conducting his research, there are several factors that make his endeavour challenging. The data collection itself is the primary practical challenge, and tied to that are the various other, competing incentives. Not only are individuals not selecting the right mix of food to provide the ideal amount of nutrients, but they are also spending disproportionate amounts on other items such as mobile devices, despite the often incredibly illiquid situations they find themselves in. This complicates the calculation and is something that Alp, and other researchers, have given great thought.

The end goal: delivering impact

A lot can be said of the interrelatedness of the various areas of economic and social development; malnutrition is only one part of the equation. However, it represents not only a disproportionate amount of the deaths in developing regions but is also most common in younger people at a crucial point in their growth. Solutions to such a widespread concern are sure to have a positive ripple effect throughout communities.

Tanisha concludes the discussion by asking about personal interesting in the study. Alp expresses that his primary motivation behind engaging in this area of research is driven by the real possibility of providing timely and tangible impact on a large group of the world population. He tells a story of a misguided mother whom he met in one of the slums during his initial project phase, who was feeding her child milk, mixed with contaminated water, with the aim of providing sufficient of nutrients.

“…so without knowing, she was pouring external microbes and bacteria without improving the calcium content of her kid’s milk. And you go back home and then you try to read something about it. And then you see every kid dying under age five is dying because of malnutrition… and diarrhea plays a big role in it. I think after those readings, I started thinking like, “I want to do something about it.” That’s a personal motivation.”

Alp Sungu is a PhD student in Management Science and Operations department at London Business School. His primary research interest is in operational restrictions in resource-limited environments. In 2020, Alp was awarded the Wheeler Institute PhD Award, a recognition of cutting-edge research at the intersection of business and development. Alp’s research is featured in the Wheeler Institute research brochure.

Tanisha Garg is an MBA 2021 student at London Business School and co-president of the LBS Healthcare Club. Passionate about pursuing a career in healthcare, Tanisha is a Bioengineering graduate with work and internship experience in multiple areas across the healthcare industry such as sales, marketing, research and IT.

Zachary Day (MBA2021) is the Co-President of the Military in Business club at London Business School. Prior to his studies, he was an officer in the Canadian Armed Forces where he served in various operational and strategic roles from 2015-2019. Zachary is an intern for the Wheeler Institute, contributing to the creation of content that amplifies the role of business in improving lives.

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