AN ECONOMIC MODEL OF WIC, THE INFANT FORMULA REBATE PROGRAM, AND THE RETAIL PRICE OF INFANT FORMULA

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.


Issue Date:
2004
Publication Type:
Report
PURL Identifier:
http://purl.umn.edu/33879
Total Pages:
39
Series Statement:
Food Assistance and Nutrition Research Report Number 39-2




 Record created 2017-04-01, last modified 2017-08-25

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