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

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...

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Bibliographic Details
Published inAmerican journal of agricultural economics Vol. 94; no. 1; pp. 80 - 96
Main Author Davis, David E
Format Journal Article
LanguageEnglish
Published Malden Oxford University Press 2012
Blackwell Publishing Ltd
Subjects
Agricultural economics
Auctions
Baby foods
Baby formula
Brand preferences
Brands
Child welfare
children
consumers (people)
Cost control
Cost estimates
Costs
Customers
food assistance
food prices
Food programs
Government policy
infant formula
infant formulas
Infants
Marginal costs
Markups
Milk consumption
Milk production
Net prices
Nutrition
oligopoly
prices
Retail sales
Retail stores
sales
Sales rebates
Studies
U.S.A
Wholesale prices
WIC
women
United States
United States > US
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Summary: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.
Bibliography:ObjectType-Article-2
SourceType-Scholarly Journals-1
ObjectType-Feature-1
content type line 23
ISSN:0002-9092
1467-8276
DOI:10.1093/ajae/aar086