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Bidding for WIC Infant Formula Contracts: Do Non-WIC Customers Subsidize WIC Customers?

  • David E. Davis

Although the Women, Infants, and Children (WIC) food-assistance program purchases over half of all U.S. infant formula, I find it does not affect wholesale prices. I estimate infant-formula marginal cost and find it low compared with the wholesale price, implying large price-cost markups. But I find the program does not affect markups. Instead, the program gives preference to one firm's brand, and that brand attains a prominence in stores that results in larger sales to nonparticipants. The preference is valuable to firms and they bid with rebates to attain exclusive approved status, which results in significant cost savings to the program. Copyright 2012, Oxford University Press.

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File URL: http://hdl.handle.net/10.1093/ajae/aar086
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Article provided by Agricultural and Applied Economics Association in its journal American Journal of Agricultural Economics.

Volume (Year): 94 (2012)
Issue (Month): 1 ()
Pages: 80-96

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Handle: RePEc:oup:ajagec:v:94:y:2012:i:1:p:80-96
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  1. 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.
  2. 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.
  3. 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.
  4. 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.
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