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An Economic Model Of Wic, The Infant Formula Rebate Program, And The Retail Price Of Infant Formula

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  • Prell, Mark A.

Abstract

This report develops an economic model that provides the theoretical framework for the econometric analyses presented in the report's companion volume, WIC and the Retail Price of Infant Formula (FANRR-39). The model examines supermarket retail prices for infant formula in a local market area, and identifies the theoretical effects of the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) and its infant formula rebate program. Special attention is given to the rebate program's sole-source procurement system by which a single manufacturer becomes a State's "contract brand"-the State's one supplier of formula to WIC infants-in exchange for paying rebates to WIC. When a manufacturer's brand is designated a State's contract brand, the model predicts that supermarkets increase that brand's retail price. The model also predicts that an increase in the ratio of WIC to non-WIC formula-fed infants in a local market results in an increase in the price of the contract brand and, through demand substitution, a relatively small price increase for noncontract brands.

Suggested Citation

  • Prell, Mark A., 2004. "An Economic Model Of Wic, The Infant Formula Rebate Program, And The Retail Price Of Infant Formula," Food Assistance and Nutrition Research Reports 33879, United States Department of Agriculture, Economic Research Service.
    • Handle: RePEc:ags:uersfa:33879
    DOI: 10.22004/ag.econ.33879
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    File URL: https://ageconsearch.umn.edu/record/33879/files/fa053902.pdf
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    References listed on IDEAS

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    1. 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.
    2. Mark G. Brown & Jong-Ying Lee, 1996. "Allocation of shelf space: A case study of refrigerated juice products in grocery stores," Agribusiness, John Wiley & Sons, Ltd., vol. 12(2), pages 113-121.
    3. Raymond J. Folwell & D. Andy Moberg, 1993. "Factors in retail shelf management impacting wine sales," Agribusiness, John Wiley & Sons, Ltd., vol. 9(6), pages 595-603.
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    Cited by:

    1. Oliveira, Victor & Frazao, Elizabeth & Smallwood, David M., 2011. "The Infant Formula Market: Consequences of a Change in the WIC Contract Brand," Economic Research Report 118020, United States Department of Agriculture, Economic Research Service.
    2. David E. Davis, 2012. "Bidding for WIC Infant Formula Contracts: Do Non-WIC Customers Subsidize WIC Customers?," American Journal of Agricultural Economics, Agricultural and Applied Economics Association, vol. 94(1), pages 80-96.
    3. Oliveira, Victor & Frazao, Elizabeth, 2015. "The WIC Program: Background, Trends, and Economic Issues, 2015 Edition," Economic Information Bulletin 197543, United States Department of Agriculture, Economic Research Service.
    4. Oliveira, Victor & Davis, David E., 2006. "Recent Trends and Economic Issues in the WIC Infant Formula Rebate Program," MPRA Paper 6657, University Library of Munich, Germany.
    5. 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.

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    Keywords

    Food Security and Poverty;

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