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

17 Pages Posted: 8 Apr 2020

See all articles by David E. Davis

David E. Davis

South Dakota State University - Department of Economics

Multiple version iconThere are 2 versions of this paper

Date Written: January 2012

Abstract

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.

Keywords: auctions, food assistance, food prices, infant formula, oligopoly, WIC

Suggested Citation

Davis, David E., Bidding for WIC Infant Formula Contracts: Do Non‐WIC Customers Subsidize WIC Customers? (January 2012). American Journal of Agricultural Economics, Vol. 94, Issue 1, pp. 80-96, 2012, Available at SSRN: https://ssrn.com/abstract=3571638 or http://dx.doi.org/10.1093/ajae/aar086

David E. Davis (Contact Author)

South Dakota State University - Department of Economics ( email )

Brookings, SD 57007-0895
United States

HOME PAGE: http://sdstate.edu/econ/faculty/david-davis/index.cfm

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