Advanced Search
MyIDEAS: Login

Bidding for WIC infant formula contracts: Do non-WIC customers subsidize WIC customers?

Contents:

Author Info

  • David E. Davis

    ()
    (Department of Economics,South Dakota State University)

Abstract

Although the WIC food assistance program purchases over one-half of all US infant formula, I find the program has little impact on the prices paid by non-WIC customers. I estimate infant-formula marginal cost and find that it is low compared to price, implying large price-cost markups. But, the WIC program is not to blame. Instead large price-cost markups are likely due to customer’s price insensitivity. WIC’s impact on non-WIC customers comes through an increase in sales owing to a WIC ―spill-over‖ effect. The WIC approved brand attains a prominence in the market that makes it a natural choice for non-WIC customers, which makes attaining WIC approval valuable to firms. Firms bid with rebates to attain exclusive WIC approved status which results in significant reductions in the cost of infant formula to the US government.

Download Info

If you experience problems downloading a file, check if you have the proper application to view it first. In case of further problems read the IDEAS help page. Note that these files are not on the IDEAS site. Please be patient as the files may be large.
File URL: http://hdl.handle.net/10.1093/ajae/aar086
File Function: Published version
Download Restriction: no

File URL: http://repec-sda.sdstate.edu/repec/sda/pdf/WICMarkupsCompletePaper.pdf
File Function: This is a pre-copy-editing, author-produced PDF of an article accepted for publication in the American Journal of Agricultural Economics following peer review. The definitive publisher-authenticated version is available online using the link above.
Download Restriction: no

File URL: http://repec-sda.sdstate.edu/repec/sda/pdf/WICMarkups_Jan_2011WP.pdf
File Function: Revised version
Download Restriction: no

File URL: http://repec-sda.sdstate.edu/repec/sda/pdf/WICMarkups_Oct09.pdf
File Function: Original version
Download Restriction: no

Bibliographic Info

Paper provided by South Dakota State University, Department of Economics in its series SDSU Working Papers in Progress with number 52009.

as in new window
Length: 43 pages
Date of creation: Oct 2009
Date of revision: Jan 2011
Publication status: Published in American Journal of Agricultural Economics, January 2012, pages 80-96
Handle: RePEc:sda:workpa:52009

Contact details of provider:
Postal: Box 504, Scobey Hall, Brookings, SD 57007-0895
Phone: 605-688-4141
Fax: 605-688-6386
Web page: http://www.sdstate.edu/econ/
More information through EDIRC

Related research

Keywords: Price cost margins; WIC; Oligopoly; Food Assistance; Infant Formula; auctions; contracts;

Other versions of this item:

Find related papers by JEL classification:

This paper has been announced in the following NEP Reports:

References

References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
as in new window
  1. Davis, David E. & Leibtag, Ephraim S., 2005. "Interstate Variation In Wic Food Package Costs: The Role Of Food Prices, Caseload Composition, And Cost-Containment Practices," Food Assistance and Nutrition Research Reports 33811, United States Department of Agriculture, Economic Research Service.
  2. John Crespi & Richard Sexton, 2005. "A Multinomial Logit Framework to Estimate Bid Shading in Procurement Auctions: Application to Cattle Sales in the Texas Panhandle," Review of Industrial Organization, Springer, vol. 27(3), pages 253-278, November.
  3. Oliveira, Victor & Davis, David E., 2006. "Recent Trends and Economic Issues in the WIC Infant Formula Rebate Program," Economic Research Report 7228, United States Department of Agriculture, Economic Research Service.
  4. Oliveira, Victor & Prell, Mark A. & Smallwood, David M. & Frazao, Elizabeth, 2004. "Wic And The Retail Price Of Infant Formula," Food Assistance and Nutrition Research Reports 33873, United States Department of Agriculture, Economic Research Service.
Full references (including those not matched with items on IDEAS)

Citations

Citations are extracted by the CitEc Project, subscribe to its RSS feed for this item.
as in new window

Cited by:
  1. McLaughlin, Patrick W. & Saitone, Tina L. & Sexton, Richard J., 2013. "Non-Price Competition and the California WIC Program," 2013 Annual Meeting, August 4-6, 2013, Washington, D.C. 150783, Agricultural and Applied Economics Association.
  2. Oliveira, Victor & Frazao, Elizabeth & Smallwood, David, 2013. "Trends in Infant Formula Rebate Contracts: Implications for the WIC Program," Economic Information Bulletin 161130, United States Department of Agriculture, Economic Research Service.
  3. Rui Huang & Jeffrey Perloff, 2014. "WIC Contract Spillover Effects," Review of Industrial Organization, Springer, vol. 44(1), pages 49-71, February.
  4. Davis, David E., 2011. "Buyer Alliances as Countervailing Power in WIC Infant-Formula Auctions," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 123863, Agricultural and Applied Economics Association.
  5. Saitone, Tina L. & Sexton, Richard J. & Volpe, Richard J., III, 2012. "Markups and Promotional Patterns of California WIC-Authorized Foods," 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington 124927, Agricultural and Applied Economics Association.

Lists

This item is not listed on Wikipedia, on a reading list or among the top items on IDEAS.

Statistics

Access and download statistics

Corrections

When requesting a correction, please mention this item's handle: RePEc:sda:workpa:52009. See general information about how to correct material in RePEc.

For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (David Davis).

If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

If references are entirely missing, you can add them using this form.

If the full references list an item that is present in RePEc, but the system did not link to it, you can help with this form.

If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your profile, as there may be some citations waiting for confirmation.

Please note that corrections may take a couple of weeks to filter through the various RePEc services.