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Buyer Alliances as Countervailing Power in WIC Infant-Formula Auctions

  • Davis, David E.

State WIC agencies in infant-formula procurement auctions receive lower bids and final prices when they are in buyer’s alliances than when they are unallied. The Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) uses an auction to procure infant formula. Manufacturers bid on the right to be an agency’s sole supplier by offering a rebate on formula sold through WIC. A theoretical model of rebates shows that bidders may shade their bids and extract surplus from agencies. An empirical estimation shows that bids are lower to alliances suggesting that alliances countervail the power of bidders to extract surplus.

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File URL: http://purl.umn.edu/123863
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Paper provided by Agricultural and Applied Economics Association in its series 2012 Annual Meeting, August 12-14, 2012, Seattle, Washington with number 123863.

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Date of creation: Dec 2011
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Handle: RePEc:ags:aaea12:123863
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