Buyer Alliances as Countervailing Power in WIC Infant-Formula Auctions

Buyer Alliances as Countervailing Power in WIC Infant-Formula Auctions 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. http://www.deepdyve.com/assets/images/DeepDyve-Logo-lg.png Review of Industrial Organization Springer Journals

Buyer Alliances as Countervailing Power in WIC Infant-Formula Auctions

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Publisher
Springer Journals
Copyright
Copyright © 2014 by Springer Science+Business Media New York
Subject
Economics / Management Science; Industrial Organization; Microeconomics
ISSN
0889-938X
eISSN
1573-7160
D.O.I.
10.1007/s11151-014-9433-0
Publisher site
See Article on Publisher Site

Abstract

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.

Journal

Review of Industrial OrganizationSpringer Journals

Published: Aug 15, 2014

References

  • Buyer groups as strategic commitments
    Dana, JD

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