Non-Price Competition in the California Women, Infants, and Children Program

• Main Author: McLaughlin, Patrick Wade
• Language: EN
• Published: University of California, Davis 2015
• Subjects: Economics|Agricultural economics
• Online Access: http://pqdtopen.proquest.com/#viewpdf?dispub=3737002

<p> Institutional characteristics of the food assistance component of the California Special Supplemental Nutritional Program for Women, Infants, and Children (California WIC Program) incentivizes food retailers serving the Program to compete in ways potentially beneficial to consumers and Program operations, including enhancing the quality of available food brands and improving food access. First, I model a WIC retailer who does not compete in price for WIC consumers who are perfectly price inelastic due to the nature of food benefits. A theoretical model of non-price competition hypothesizes that pure non-price competition in brands mimics price competition, whereby these retailers carry a higher variety and quality level of brands under intense spatial competition; and that retailers will either minimally or maximally differentiate in horizontal (e.g., physical) space. Second, I develop the concept of vendor attrition, committed by participants, as a behavioral measure of retailers' contribution to food access in the WIC Program. An empirical approach using a unique dataset on retailers' locations and brand offerings, as well as participants' food benefit redemption patterns, confirms that retailers compete in brands. Namely, retailers carry more and better brands in salient product categories when facing more competitors, which, in turn, reduces attrition and increases market share. The results also suggest that maximal horizontal differentiation prevails, allowing the retailers to minimize costly brand competition. </p><p> Third, the nature of competition promotes food access within the California WIC Program for the following reasons: maximal horizontal differentiation serves to increase the geographic coverage of WIC retailers; and observed entry prior to a moratorium on new authorized retailers appeared to positively benefit Program access in the Greater Los Angeles region. In particular, entrant vendors experience lower vendor attrition, coincide with localized growth in participation, and may have induced new participation, evidenced by higher ratios of de novo participants. These effects on access systematically vary according to retailer characteristics and the food access status of retailers' locations. Policy aiming to reduce costs in state WIC Programs by restricting the behavior of retailers can be improved by considering the heterogeneity of retailers' impact on Program costs and access.</p>