The Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) provides participating formula fed infants with free infant formula. This study estimates that, in 2020, about half of all infant formula in the United States was consumed by WIC infants. Federal law requires that WIC State agencies use a cost containment system to reduce infant formula costs. Most State agencies use a single supplier, competitively bid rebate program. The State agency awards a contract to the infant formula manufacturer offering the lowest net wholesale price per unit of infant formula, defined as the difference between the manufacturer's wholesale price and the manufacturer's rebate to the State agency. This study summarizes recent trends in State agencies' infant formula rebate contracts and examines how factors, such as declining shares of infants born in the United States participating in WIC, contribute to these trends. Compared with previous contracts, contracts in effect in March 2023 resulted in greater savings to WIC for infant formula purchases. After adjusting for inflation, net wholesale prices decreased by $1.49 per 90 fluid ounces of reconstituted formula from previous contracts on average.--

This paper examines the impact of government procurement in social welfare programs on consumers, manufacturers, and the government. We analyze the U.S. infant formula market, where over half of the total sales are purchased by the Women, Infants, and Children (WIC) program. The WIC program utilizes first-price auctions to solicit rebates from the three main formula manufacturers, with the winner exclusively serving all WIC consumers in the winning state. The manufacturers compete aggressively in providing rebates which account for around 85% of the wholesale price. To rationalize and disentangle the factors contributing to this phenomenon, we model manufacturers' retail pricing competition by incorporating two unique features: price inelastic WIC consumers and government regulation on WIC brand prices. Our findings confirm three sizable benefits from winning the auction: a notable spill-over effect on non-WIC demand, a significant marginal cost reduction, and a higher retail price for the WIC brand due to the price inelasticity of WIC consumers. Our counterfactual analysis shows that procurement auctions affect manufacturers asymmetrically, with the smallest manufacturer harmed the most. More importantly, by switching from the current mechanism to a predetermined rebate procurement, the government can still contain the cost successfully, consumers' surplus is greatly improved, and the smallest manufacturer benefits from the switch, promoting market competition.

The Supplemental Nutrition Assistance Program, Special Supplemental Nutrition Program for Women, Infants, and Children, National School Lunch Program, and School Breakfast Program are complementary, serving different nutritional needs of low-income children. We analyze determinants of the number of nutrition assistance programs low-income households with children participate in given multiprogram eligibility. Results obtained using Survey of Income and Program Participation data indicate households with young children, in metro areas, and with a college-educated or married respondent participate in fewer programs given eligibility. Program factors that reduce participation stigma and transaction costs are further associated with increased take-up.

Abstract Discrimination in tipping creates concerns of inequity in service quality for restaurant operators (Brewster 2017). We use the National Household Food Acquisition and Purchase Survey data to conduct one of the very few nationally representative examinations of tipping behavior at US restaurants. We focus on differences in tipping behavior between groups with identifiable characteristics and investigate whether tipping differences between groups are robust to inclusion of a variety of controls. We investigate tipping at the extensive and intensive margins. In contrast to earlier studies, we find little evidence that tipping varies by race and gender.

This study examined the nutritional quality of shopping trips at non-traditional retailers by SNAP-authorization status. Bivariate and multivariate analyses were conducted using National Household Food Acquisition and Purchase Survey data on 1,841 US households with 3,968 shopping trips. Results indicate the relationship between SNAP retailer authorization and the nutritional quality of non-traditional retailer shopping trips varies with income and SNAP participation. Healthy Eating Index-2010 (HEI-2010) scores were 3.40 points higher for higher-income households' shopping trips at SNAP-authorized versus unauthorized retailers. In contrast, HEI-2010 scores did not vary significantly with SNAP retailer authorization for SNAP participants and income-eligible non-participants.

The US infant formula market is highly concentrated and over one-half of the total sales are through the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC). The three major manufacturers compete not only for non-WIC consumers but also to serve WIC participants exclusively by bidding a rebate on the wholesale prices. The winning rebates are about 85-90% of manufacturers’ wholesale prices. Using data of sales and manufacturers’ rebates, we investigate how the WIC program (1) affects manufacturers’ pricing strategies and leads to the substantial gap between the wholesale prices and the after-rebate prices, and (2) distorts the prices paid by the non-WIC consumers. Our estimates show that manufacturers’ marginal costs are much higher than the prices paid by WIC program. Nevertheless, winning a WIC contract is profitable because serving WIC participants has a substantial spillover effect (increasing 30.6% of the demand from nonparticipants), and the manufacturer’s loss from WIC participants are subsidized by the increased prices for nonparticipants. We further conduct counterfactual analyses to investigate the impacts of the WIC program on non-WIC consumers and test the existence of collusion in the non-WIC market. ∗Department of Economics, Texas A&M University, College Station, TX. †Department of Economics, South Dakota State University, Brookings, SD. ‡Department of Justice, Washington, DC. §Department of Agricultural and Resource Economics, University of Connecticut, Storrs, CT. ¶Department of Economics, Indiana University, Bloomington, IN.

This paper investigates the effect of Supplemental Nutrition Assistance Program (SNAP) benefits for food insecurity. The American Recovery and Reinvestment Act (ARRA) temporarily increased SNAP benefits. We use that increase as a natural experiment to identify the causal effect of endogenous SNAP benefits. We estimate models of food insecurity with linear two-stage least squares and non-linear instrumental variable (IV) probit. Results suggest that a per person SNAP dollar decreases food insecurity by 0.4% to 0.9%. However, effects are nonlinear. The probability of food insecurity is highest, and marginal effects are largest, when benefit amounts are small.

State agencies in infant-formula procurement auctions receive lower bids when they are in buyer alliances than when they are unallied. The Special Supplemental Nutrition Program for Women, Infants, and Children (WIC) uses an auction to procure infant formula. Manufacturers bid on the right to be an agency’s sole supplier by offering a rebate on formula sold through WIC. Agencies frequently join together in buyer alliances. An empirical estimation shows that bids are lower to alliances and that lower prices result because alliances are heterogeneous. Results suggest that when heterogeneity is not controlled, bids decline with alliance size, which has policy implications because Congress recently limited alliance size.

This research investigates the effect of Supplemental Nutrition Assistance Program benefits (SNAP, formerly known as the Food Stamp program) for food insecurity. SNAP provides benefits to qualifying households for purchasing food. Some have suggested that SNAP benefits may be less effective in some areas because of geographic differences in food prices (Leibtag, 2007; Nord and Hopwood, 2007). We include food prices in our analysis to control for price differences. We find that holding food prices constant, an additional SNAP dollar per-capita reduces the probability of food insecurity by about 0.5 percent. However, we find that marginal effects vary with the level of benefit received and that marginal effects are largest at low benefit levels. Furthermore, we find that even though household incomes are higher when benefits are low, the probability of food insecurity is larger than when benefits are higher. Higher food prices decrease the purchasing power of SNAP benefits, reducing food security.

Although the WIC food assistance program purchases over one-half of all US infant formula, I find the program has little impact on the prices paid by non-WIC customers. I estimate infant-formula marginal cost and find that it is low compared to price, implying large price-cost markups. But, the WIC program is not to blame. Instead large price-cost markups are likely due to customer’s price insensitivity. WIC’s impact on non-WIC customers comes through an increase in sales owing to a WIC “spill-over” effect. The WIC approved brand attains a prominence in the market that makes it a natural choice for non-WIC customers, which makes attaining WIC approval valuable to firms. Firms bid with rebates to attain exclusive WIC approved status which results in significant reductions in the cost of infant formula to the US government.

Using a unique data set of transaction-level retail food sales, I find that food prices are negatively related to supermarket chains' shares of total US food sales. The negative relationship suggests that supermarket chains enjoy economies of scale or benefit from an improved post-merger bargaining position. In contrast, the regressions also show an increase in price after a merger which is independent from changes in observable control variables. Other analysis suggests mergers are associated with decreases in the frequency and depth of price-promotions. These latter effects suggest supermarkets enjoy greater pricing power post-merger, perhaps due to improved brand identity.

Using a unique data set of transaction-level retail food sales, I find that food prices are negatively related to supermarket chains’ shares of total U.S. food sales. The negative relationship suggests that supermarket chains enjoy economies of scale or benefit from an improved post-merger bargaining position. In contrast, the regressions also show an increase in price after a merger, which is independent from changes in observable control variables. Subsequent fractional logit analysis suggests mergers are associated with decreases in the frequency and depth of price-promotions. These latter effects suggest supermarkets enjoy greater unilateral pricing power post-merger, perhaps due to improved brand identity.

Determining the impacts on consumers of governmental policies that affect the demand for food products requires a theoretically consistent micro-level demand model. We estimate a system of demands for weekly city-level dairy product purchases by nonlinear three-stage least squares to account for joint determination between quantities and prices. We analyze the distributional effects of federal milk marketing orders, and find results that vary substantially across demographic groups. Families with young children suffer, while wealthier, childless couples benefit. We also find that households with lower incomes bear a greater regulatory burden due to marketing orders than those with higher income levels.

I use a unique data set of retail food prices to analyze mergers between supermarket chains. The data allow for an examination of the effects of mergers on prices, the frequency of promotions, and the depth of promotions. I find that increases in a chain’s share of the total US food sales are associated with price decreases, suggesting that supermarkets enjoy economies of scale and/or benefit from an improved bargaining position relative to their suppliers after a merger. I also find that mergers are associated with decreases in the frequency and depth of price-promotions.

Determining the impacts on consumers of government policies affecting the demand for food products requires a theoretically consistent micro-level demand model. We estimate a system of demands for weekly city-level dairy product purchases by nonlinear three stage least squares to account for joint determination between quantities and prices. We analyze the distributional effects of federal milk marketing orders, and find results that vary substantially across demographic groups. Families with young children suffer, while wealthier childless couples benefit. We also find that households with lower incomes bear a greater regulatory burden due to marketing orders than those with higher income levels. Jel codes: Q1, D12, E21 *Corresponding author. Milk Marketing Order Winners and Losers