Defining the Leader and the Follower in a Two-Sided Market: An Inactivity Analysis in the Food Waste Industry

A large percentage of food produced is wasted, which has detrimental environmental, social, and economic consequences. Consequently, different actors within the food chain have implemented various initiatives to tackle food waste. Particularly retailers, who are keen on reducing food waste because it lowers their profitability, have started selling perishable food, eg fruits and vegetables, close to the recommended expiration date at discounted prices. However, information about these discounts do not always reach consumers, leading to the creation of platforms, which are manifested as mobile applications for consumers, that facilitate information flow from retailers to consumers. While these platforms reduce information asymmetry, they suffer from the problem of two-sided networks in that both parties need to remain active for the platform to be sustained. In order to sustain the activity on the platform, the main challenge lies in identifying which party is the leader and which one is the follower, a challenge which is taken up in this study. By using a combination of a panel VAR model and an impulse response function, along with data from a food waste reducing platform with gradually dwindling activity, we examine to which group the increasing inactivity can be attributed: the retailers or the consumers. Our data span 52 weeks and contain 900,000 distinct product uploads from 235 supermarkets to the platform which has 21,600 active users. We find that consumers play a larger role than retailers in the rising inactivity on the platform dedicated to reducing food waste. We discuss the implications of our findings for policy makers.