Tina L. Saitone

Impacts of Minimum Quality Standards Imposed Through Marketing Orders or Related Producer Organizations

We analyze the impacts of minimum quality standards (MQS) imposed by producers acting collectively through a producer organization, such as a marketing order. MQS imposed in a competitive market can never enhance social welfare because in general an MQS creates two deadweight losses--one due to inefficient enhancement of product quality and a second due to wastage of the low-quality product. Any MQS that a competitive industry implements based upon a profit criterion causes all consumers in the market to be harmed. However, an MQS may be preferred relative to supply control as a second-best instrument for transferring income to producers. Copyright 2010, Oxford University Press.

A Flexible Oligopoly-Oligopsony Model for Classroom Simulations and Policy Analyses

We present a flexible model of a vertical market where firms with possible oligopsony power procure a key input, combine it with other inputs purchased competitively, and sell a final product to consumers in a market that may have oligopoly power. The model is capable of depicting all forms of market power ranging from perfect competition to pure monopoly/monopsony. A linear version of the model depicts market equilibrium in terms of only five parameters. The model is useful in teaching undergraduate students about the impacts of market power in classes such as microeconomics, industrial organization, and regulation. An accompanying Excel spreadsheet enables instructors to conduct in-class illustrations and students to utilize the model to perform various problem solving and policy analyses.

The Economics of Food Vendors Specialized to Serving the Women, Infants, and Children Program

Abstract This paper focuses on the impacts of food vendors that have emerged primarily or exclusively to redeem benefits for the Women, Infants and Children (WIC) Program. Federal regulations impose strict requirements on state WIC agencies which authorize vendors that derive more than 50% of their food sales through WIC. Such vendors are commonly known as above‐50 or A50 vendors, and most state WIC agencies do not authorize them. Using extensive transactions‐level data for the Greater Los Angeles area (GLA), we examine A50 vendors’ performance in the WIC program, including their pricing behavior relative to other WIC vendors in a but‐for world where A50 vendors are not authorized. We also conduct econometric tests designed to gauge A50 vendors’ impacts on WIC program access and participation, and costs charged for WIC foods by other program vendors. Results indicate that A50 vendors operating in GLA (a) modestly reduced WIC program food costs relative to a but‐for world where they were not authorized, (b) had a modest pro‐competitive effect on the pricing behavior of small, non‐A50 vendors, which have tended to charge the highest absolute prices for WIC foods in California, (c) caused a modest reduction in participant travel distance (and, hence, transaction costs), and (d) appear to have facilitated participant access. On balance, our results suggest that A50 vendors can improve the food‐delivery environment for the WIC program and facilitate participant access to WIC benefits without imposing additional food costs on the program.

Cost Containment in the WIC Program: Vendor Peer Groups and Reimbursement Rates

Cost containment is a concern for the Special Supplemental Nutrition Program for Women, Infants, and Children (WIC), a Federal food assistance program providing participants with key foods and beverages. Since WIC is not an entitlement program, the amount of aid available to cover those who are eligible depends on fixed budget appropriations and WIC agency cost containment. This report examines the extent to which cost containment might be improved through changes in the regulations governing WIC vendors and allowable reimbursement levels for foods covered by the program. Using California, the largest U.S. WIC program, as a case study, we analyze data on WIC redemptions—that is, reimbursements to vendors for items bought by WIC participants—and determine the potential for cost savings through changes to the cost-containment practices. Smaller vendors, often with higher operating and procurement costs, are more likely to charge higher prices for WIC products than larger vendors. However,these small vendors comprise only a small percentage of total WIC redemptions. Policies intended to reduce maximum allowable WIC reimbursement rates would have little to no effect on most standard-size supermarkets, where the majority of WIC transactions take place.