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Buyer Alliances as Countervailing Power in WIC Infant-Formula Auctions

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  • Davis, David E.

Abstract

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.

Suggested Citation

  • 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.
  • Handle: RePEc:ags:aaea12:123863
    DOI: 10.22004/ag.econ.123863
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    File URL: https://ageconsearch.umn.edu/record/123863/files/AAEA_Bidding%20for%20Sole-Source%20Contracts.pdf
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    Cited by:

    1. Oliveira, Victor & Davis, David, 2015. "Manufacturers’ Bids for WIC Infant Formula Rebate Contracts, 2003-2013," Economic Information Bulletin 206808, United States Department of Agriculture, Economic Research Service.
    2. Katherine Meckel, 2020. "Is the Cure Worse Than the Disease? Unintended Effects of Payment Reform in a Quantity-Based Transfer Program," American Economic Review, American Economic Association, vol. 110(6), pages 1821-1865, June.

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    More about this item

    Keywords

    Consumer/Household Economics; Food Consumption/Nutrition/Food Safety; Industrial Organization;
    All these keywords.

    JEL classification:

    • L13 - Industrial Organization - - Market Structure, Firm Strategy, and Market Performance - - - Oligopoly and Other Imperfect Markets
    • D43 - Microeconomics - - Market Structure, Pricing, and Design - - - Oligopoly and Other Forms of Market Imperfection
    • D44 - Microeconomics - - Market Structure, Pricing, and Design - - - Auctions
    • Q18 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Agricultural Policy; Food Policy
    • I18 - Health, Education, and Welfare - - Health - - - Government Policy; Regulation; Public Health

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