An Economic Model of WIC, the Infant Formula Rebate Program, and the Retail Price of Infant Formula
by
Mark Prell
Electronic Publications from the Food Assistance & Nutrition Research Program No. (FANRR--39-2) 39 pp, January 2005
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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-39-1). 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.
Keywords: WIC program, infant formula, cost containment, rebates, food package costs, Special Supplemental Nutrition Program for Women, Infants, and Children, child nutrition, food assistance
In this publication...
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Abstract, Acknowledgments, Contents, and Summary, Pdf file 54 kb
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Introduction, Pdf file 40 kb
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Structure of the WIC Model, Pdf file 72 kb
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Solution of the WIC Model, Pdf file 51 kb
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Results of the WIC Model, Pdf file 142 kb
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Appendix , Pdf file 41 kb
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References, Pdf file 33 kb
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Entire document, Pdf file 982 kb
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See also: WIC and the Retail Price of Infant Formula.
