Incentive contract design for food retailers to reduce food deserts in the US

In the US, obesity affects over 37% of the adult population and over 16% of the child and adolescent population. Although not-for-profit agencies cannot directly control what a person eats, they can influence the supply side of the obesity epidemic by incentivizing food retailers to open stores in regions of the US where food deserts exist. An incentive contract design dependent upon performance and resulting health benefit is presented for food retailers to reduce food deserts in the US. A principal-agent framework is used to capture the competing interests and moral hazard from the contracting mechanism. Optimization models are developed to determine the most effective and equitable resource allocations from the initiative given a target reduction in obesity rate or a set budget, while determining the optimal subsidy these agencies should offer to food retailers to incentivize operation in certain counties. These subsidies are designed to create financially viable conditions for food retailers to offer high quality, healthy food alternatives. The impact of retailer location on obesity is based on estimates of marginal effect on obesity rate. Given an example initiative in metropolitan Atlanta, Georgia and surrounding counties, the overall county-wide obesity rate would decrease by 1.17% with a fixed budget of $400M. Sensitivity analysis on the reduction in obesity is performed for varying total budget amounts. This incentive contract design strategy is a positive step toward ensuring that the underserved US population has better access to healthy foods while helping solve the obesity epidemic.