UC Davis Agricultural and Resource Economics

Richard Sexton, University of California, Davis

A WICked Problem? Cost Containment in the Women, Infants and Children Program

Date and Location

Tuesday, December 3, 2013, 12:10 PM - 1:30 PM
ARE Conference Room, 2102 Social Sciences and Humanities

Abstract

Although the Women, Infants and Children (WIC) Program is a key part of America’s safety net, its structure fails to incentivize participants to be cost conscious in their purchases and may cause retailers to attach excessive markups to WIC products. Unlike the more familiar SNAP program, WIC allocates food instruments (FI) to participants, which enable the participant to buy specific nutritious foods indicated on the FI. Participants’ demands for these foods are in essence perfectly inelastic. We investigate cost containment in the WIC Program, with focus on California. Results show that smaller vendors often set excessive markups for WIC foods. The large amount of choice afforded to participants in California regarding products, brands, and package sizes also detracts from the goal of cost containment. However, larger vendors do not markup WIC foods more or promote them less than comparable control products. Cost containment can be improved by limiting participant choice, targeting Program sales to larger vendors, and using large-vendor prices as benchmarks to limit prices set by smaller vendors.

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