TL;DR
Feeding America replaced a centralized, one-size-fits-all allocation system with a market-style auction using a proprietary 'shares' currency. The reform sharply reduced waste and boosted annual supply by about 100 million pounds, the equivalent of feeding roughly 60,000 more people each day.
What happened
For decades Feeding America allocated its national shipments using a centralized formula that divided pounds of food in proportion to a 'goal factor' based on population and poverty. That approach treated all pounds as interchangeable, ignored local inventories and storage limits, and led to duplication, spoilage and unwieldy donations. Beginning in 2004 a task force led by economists and food-bank veterans designed the Choice System: food banks receive 'shares' according to need and bid in sealed, first-price online auctions held twice daily. Shares are redistributed each midnight by the same need-based formula. The platform added features to improve access for smaller organizations, including interest-free credit, joint bidding to split loads, and delegation options. Within months the system revealed true demand differences across goods, encouraged donors, enabled food banks to resell surpluses and increased annual distributed food by roughly 100 million pounds.
Why it matters
- Allocating goods by choice rather than by one-size-fits-all rules can cut waste and better match supply to local needs.
- A market-design approach can unlock previously unusable or rejected donations by improving liquidity and matching speed.
- Smaller or resource-poor organizations gained better access to higher-quality items through credit and joint mechanisms.
- The reform produced large, measurable increases in supply without relying on price-based cash transfers to end recipients.
Key facts
- Under the old system Feeding America distributed about 220 million pounds of food per year using a needs-based 'goal factor' allocation.
- After switching to the Choice System, national supply rose by approximately 100 million pounds annually (about a 35% increase); 50 million of those pounds appeared in the first seven months.
- The Choice System uses a proprietary currency called 'shares'; food banks get shares by need and spend them in sealed, first-price auctions posted online twice a day.
- Shares spent during a day are pooled and redistributed each midnight using the same need-based formula so high bids can benefit all participants.
- Average price observed was about 0.28 shares per pound (roughly three pounds per share), but prices varied widely by commodity.
- Produce typically sold for just 4% of the average good’s price, while rice, pasta and cereal cost about three times the median.
- Food banks sold surplus loads to one another after the reform, adding about 12 million pounds a year back into the system.
- Mechanisms intended to protect smaller banks—like the Fairness and Equity Committee and delegated bidding—were rarely needed in practice.
- Only about 1.6% of winning bids used joint bidding to split truckloads among multiple food banks.
What to watch next
- Whether the Choice System model is adopted or adapted by other large-scale food-distribution networks beyond Feeding America: not confirmed in the source
- Longer-term effects on nutritional outcomes and client diets as food banks choose higher-quality goods: not confirmed in the source
- How donor behavior and donation composition evolve over multiple years under the auction system: partial evidence in the source shows donors gave more, but long-term trends are not confirmed in the source
Quick glossary
- Market design: A field of economics that creates rules, algorithms or auction mechanisms to allocate resources efficiently and fairly in markets or matching problems.
- Shares (monopoly money): A proprietary, non-cash currency distributed to participants to bid for goods in an internal auction system.
- Sealed, first-price auction: An auction format where bidders submit hidden bids and the highest bidder wins, paying the amount they bid.
- Goal factor: Feeding America's pre-reform metric combining poverty and population used to allocate pounds of food across food banks.
- Liquidity: The ability of a market or system to quickly match supply with demand so goods move efficiently rather than sit unused.
Reader FAQ
Why was the old allocation system failing?
It treated all pounds as identical, lacked visibility into local inventories and storage constraints, and caused duplication and spoilage.
How did the new system preserve equity while using market mechanisms?
Food banks received shares in proportion to need and nightly redistribution of shares used the same need-based formula, so bidding activity could benefit all participants.
Did smaller food banks lose out under the auction model?
No — the system included interest-free credit, joint bidding, and delegation options; safeguards designed for smaller banks saw little use.
Is adoption of this approach by other organizations confirmed?
not confirmed in the source
For most of its history, Feeding America, the nation’s largest nonprofit, relied on a broken system to distribute its 220 million pounds of food per year. It ignored existing stocks…
Sources
- Market design can feed the poor
- How Food Banks Use Markets to Feed the Poor
- How a market system helps Feeding America distribute food
- The Allocation of Food to Food Banks
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