IDEAS home Printed from https://ideas.repec.org/a/eee/proeco/v268y2024ics0925527323003547.html
   My bibliography  Save this article

The performance of government subsidy schemes in a competitive vaccine market considering consumers' free-riding behavior

Author

Listed:
  • Xu, Danni
  • Wang, Fan
  • Zhuo, Xiaopo
  • Liu, Yaoqi

Abstract

Vaccination is acknowledged as the most cost-effective means of combating epidemics. However, the free-riding behavior frequently results in vaccination rates falling below the socially optimal level. To address this issue, governments frequently offer subsidies to either vaccine suppliers or consumers. This paper develops a game-theoretic model that incorporates two vaccine suppliers with different efficacy rates and prices. We propose two subsidy schemes, one based on vaccine price and the other based on vaccine efficacy rate, with the aim of improving vaccination rates. Our results demonstrate that the price-based subsidy scheme (PSS) leads to a higher vaccine price compared to the efficacy-based subsidy scheme (ESS). Moreover, the ESS proves more effective in increasing the equilibrium vaccination rate when the efficacy rate is low, while the PSS is more effective when the efficacy rate is high. However, if the government’s budget is limited, the ESS is more likely to improve the equilibrium vaccination rate compared to the PSS.

Suggested Citation

  • Xu, Danni & Wang, Fan & Zhuo, Xiaopo & Liu, Yaoqi, 2024. "The performance of government subsidy schemes in a competitive vaccine market considering consumers' free-riding behavior," International Journal of Production Economics, Elsevier, vol. 268(C).
    • Handle: RePEc:eee:proeco:v:268:y:2024:i:c:s0925527323003547
    DOI: 10.1016/j.ijpe.2023.109122
    as

    Download full text from publisher

    File URL: http://www.sciencedirect.com/science/article/pii/S0925527323003547
    Download Restriction: Full text for ScienceDirect subscribers only
    File URL: https://libkey.io/10.1016/j.ijpe.2023.109122?utm_source=ideas
    LibKey link: if access is restricted and if your library uses this service, LibKey will redirect you to where you can use your library subscription to access this item
    ---><---

    As the access to this document is restricted, you may want to search for a different version of it.

    References listed on IDEAS

    as
    1. Proano, Ruben A. & Jacobson, Sheldon H. & Zhang, Wenbo, 2012. "Making combination vaccines more accessible to low-income countries: The antigen bundle pricing problem," Omega, Elsevier, vol. 40(1), pages 53-64, January.
    2. Xie, Lei & Hou, Pengwen & Han, Hongshuai, 2021. "Implications of government subsidy on the vaccine product R&D when the buyer is risk averse," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 146(C).
    3. De Boeck, Kim & Decouttere, Catherine & Vandaele, Nico, 2020. "Vaccine distribution chains in low- and middle-income countries: A literature review," Omega, Elsevier, vol. 97(C).
    4. Hamed Mamani & Stephen E. Chick & David Simchi-Levi, 2013. "A Game-Theoretic Model of International Influenza Vaccination Coordination," Management Science, INFORMS, vol. 59(7), pages 1650-1670, July.
    5. Berezin, Mabel & Eads, Alicia, 2016. "Risk is for the rich? Childhood vaccination resistance and a Culture of Health," Social Science & Medicine, Elsevier, vol. 165(C), pages 233-245.
    6. Geoffard, Pierre-Yves & Philipson, Tomas, 1997. "Disease Eradication: Private versus Public Vaccination," American Economic Review, American Economic Association, vol. 87(1), pages 222-230, March.
    7. Adida, Elodie & Dey, Debabrata & Mamani, Hamed, 2013. "Operational issues and network effects in vaccine markets," European Journal of Operational Research, Elsevier, vol. 231(2), pages 414-427.
    8. Zhao, Meng & Li, Bin & Ren, Jiali & Hao, Zhihua, 2023. "Competition equilibrium of ride-sourcing platforms and optimal government subsidies considering customers’ green preference under peak carbon dioxide emissions," International Journal of Production Economics, Elsevier, vol. 255(C).
    9. Retsef Levi & Georgia Perakis & Gonzalo Romero, 2017. "On the Effectiveness of Uniform Subsidies in Increasing Market Consumption," Management Science, INFORMS, vol. 63(1), pages 40-57, January.
    10. Dastgoshade, Sohaib & Shafiee, Mohammad & Klibi, Walid & Shishebori, Davood, 2022. "Social equity-based distribution networks design for the COVID-19 vaccine," International Journal of Production Economics, Elsevier, vol. 250(C).
    11. Li, Qiu & Li, MingChu & Lv, Lin & Guo, Cheng & Lu, Kun, 2017. "A new prediction model of infectious diseases with vaccination strategies based on evolutionary game theory," Chaos, Solitons & Fractals, Elsevier, vol. 104(C), pages 51-60.
    12. Xu, Changyan & Wang, Chuanxu & Huang, Rongbing, 2020. "Impacts of horizontal integration on social welfare under the interaction of carbon tax and green subsidies," International Journal of Production Economics, Elsevier, vol. 222(C).
    13. Maurer, Jürgen, 2009. "Who has a clue to preventing the flu? Unravelling supply and demand effects on the take-up of influenza vaccinations," Journal of Health Economics, Elsevier, vol. 28(3), pages 704-717, May.
    14. Baojun Jiang & Chang Liu, 2019. "Managerial Optimism in a Competitive Market," Production and Operations Management, Production and Operations Management Society, vol. 28(4), pages 833-846, April.
    15. Xuying Zhao & Hong Guo & Gangshu Cai & Subhajyoti Bandyopadhyay, 2021. "The Role of Expectation–Reality Discrepancy in Service Contracts," Production and Operations Management, Production and Operations Management Society, vol. 30(11), pages 4160-4175, November.
    16. Fang, Lei & Zhao, Sai, 2023. "On the green subsidies in a differentiated market," International Journal of Production Economics, Elsevier, vol. 257(C).
    17. Begen, Mehmet A. & Pun, Hubert & Yan, Xinghao, 2016. "Supply and demand uncertainty reduction efforts and cost comparison," International Journal of Production Economics, Elsevier, vol. 180(C), pages 125-134.
    18. Kessing, Sebastian G. & Nuscheler, Robert, 2006. "Monopoly pricing with negative network effects: The case of vaccines," European Economic Review, Elsevier, vol. 50(4), pages 1061-1069, May.
    19. Wang, Fan & Xu, Danni & Zhuo, Xiaopo & Zhang, Chao & Liu, Yaoqi, 2022. "Improving consumer welfare in vaccine market: Pricing, government subsidies and consumer awareness," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 167(C).
    20. Hendrix, K.S. & Sturm, L.A. & Zimet, G.D. & Meslin, E.M., 2016. "Ethics and childhood vaccination policy in the United States," American Journal of Public Health, American Public Health Association, vol. 106(2), pages 273-278.
    21. Shin, Inyong & Kim, Hyunho, 2010. "The effect of subsidy policies on the product quality improvement," Economic Modelling, Elsevier, vol. 27(3), pages 687-696, May.
    22. Alam, Shahriar Tanvir & Ahmed, Sayem & Ali, Syed Mithun & Sarker, Sudipa & Kabir, Golam & ul-Islam, Asif, 2021. "Challenges to COVID-19 vaccine supply chain: Implications for sustainable development goals," International Journal of Production Economics, Elsevier, vol. 239(C).
    23. Hannah K. Smalley & Pinar Keskinocak & Faramroze G. Engineer & Larry K. Pickering, 2011. "Universal Tool for Vaccine Scheduling: Applications for Children and Adults," Interfaces, INFORMS, vol. 41(5), pages 436-454, October.
    24. Goodkin-Gold, Matthew & Kremer, Michael & Snyder, Christopher M. & Williams, Heidi, 2022. "Optimal vaccine subsidies for endemic diseases," International Journal of Industrial Organization, Elsevier, vol. 84(C).
    25. Terry A. Taylor & Wenqiang Xiao, 2019. "Donor Product‐Subsidies to Increase Consumption: Implications of Consumer Awareness and Profit‐Maximizing Intermediaries," Production and Operations Management, Production and Operations Management Society, vol. 28(7), pages 1757-1772, July.
    26. Guo, Feiyu & Cao, Erbao, 2021. "Can reference points explain vaccine hesitancy? A new perspective on their formation and updating," Omega, Elsevier, vol. 99(C).
    27. Yinjie Zhang & Chunxiang Guo & Liangcheng Wang, 2020. "Supply Chain Strategy Analysis of Low Carbon Subsidy Policies Based on Carbon Trading," Sustainability, MDPI, vol. 12(9), pages 1-20, April.
    28. Wang, Jian-Jun & Li, Zhong-Ping & Shi, Jim (Junmin) & Chang, Ai-Chih (Jasmine), 2021. "Hospital referral and capacity strategies in the two-tier healthcare systems," Omega, Elsevier, vol. 100(C).
    29. Matthew J. Robbins & Sheldon H. Jacobson & Uday V. Shanbhag & Banafsheh Behzad, 2014. "The Weighted Set Covering Game: A Vaccine Pricing Model for Pediatric Immunization," INFORMS Journal on Computing, INFORMS, vol. 26(1), pages 183-198, February.
    30. Stephen E. Chick & Hamed Mamani & David Simchi-Levi, 2008. "Supply Chain Coordination and Influenza Vaccination," Operations Research, INFORMS, vol. 56(6), pages 1493-1506, December.
    31. Siciliani, Luigi & Straume, Odd Rune, 2019. "Competition and equity in health care markets," Journal of Health Economics, Elsevier, vol. 64(C), pages 1-14.
    32. Banafsheh Behzad & Sheldon H. Jacobson & Matthew J. Robbins, 2015. "A symmetric capacity-constrained differentiated oligopoly model for the United States pediatric vaccine market with linear demand," IISE Transactions, Taylor & Francis Journals, vol. 47(11), pages 1252-1266, November.
    33. Shun‐ichiro Bessho & Yoko Ibuka, 2019. "Interdependency in vaccination policies among Japanese municipalities," Health Economics, John Wiley & Sons, Ltd., vol. 28(2), pages 299-310, February.
    Full references (including those not matched with items on IDEAS)

    Most related items

    These are the items that most often cite the same works as this one and are cited by the same works as this one.
    1. Duijzer, Lotty Evertje & van Jaarsveld, Willem & Dekker, Rommert, 2018. "Literature review: The vaccine supply chain," European Journal of Operational Research, Elsevier, vol. 268(1), pages 174-192.
    2. Wang, Fan & Xu, Danni & Zhuo, Xiaopo & Zhang, Chao & Liu, Yaoqi, 2022. "Improving consumer welfare in vaccine market: Pricing, government subsidies and consumer awareness," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 167(C).
    3. Muckstadt, John A. & Klein, Michael G. & Jackson, Peter L. & Gougelet, Robert M. & Hupert, Nathaniel, 2023. "Efficient and effective large-scale vaccine distribution," International Journal of Production Economics, Elsevier, vol. 262(C).
    4. Choudhury, Nishat Alam & Ramkumar, M. & Schoenherr, Tobias & Singh, Shalabh, 2023. "The role of operations and supply chain management during epidemics and pandemics: Potential and future research opportunities," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 175(C).
    5. Tang, Lianhua & Li, Yantong & Bai, Danyu & Liu, Tao & Coelho, Leandro C., 2022. "Bi-objective optimization for a multi-period COVID-19 vaccination planning problem," Omega, Elsevier, vol. 110(C).
    6. Lin, Qi & Zhao, Qiuhong & Lev, Benjamin, 2022. "Influenza vaccine supply chain coordination under uncertain supply and demand," European Journal of Operational Research, Elsevier, vol. 297(3), pages 930-948.
    7. Lunday, Brian J. & Robbins, Matthew J., 2019. "Collaboratively-developed vaccine pricing and stable profit sharing mechanisms," Omega, Elsevier, vol. 84(C), pages 102-113.
    8. Fadaki, Masih & Abareshi, Ahmad & Far, Shaghayegh Maleki & Lee, Paul Tae-Woo, 2022. "Multi-period vaccine allocation model in a pandemic: A case study of COVID-19 in Australia," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 161(C).
    9. Stephen E. Chick & Sameer Hasija & Javad Nasiry, 2017. "Information Elicitation and Influenza Vaccine Production," Operations Research, INFORMS, vol. 65(1), pages 75-96, February.
    10. Westerink-Duijzer, L.E. & Schlicher, L.P.J. & Musegaas, M., 2019. "Fair allocations for cooperation problems in vaccination," Econometric Institute Research Papers EI2019-06, Erasmus University Rotterdam, Erasmus School of Economics (ESE), Econometric Institute.
    11. Hammami, Ramzi & Salman, Sinan & Khouja, Moutaz & Nouira, Imen & Alaswad, Suzan, 2023. "Government strategies to secure the supply of medical products in pandemic times," European Journal of Operational Research, Elsevier, vol. 306(3), pages 1364-1387.
    12. Hu, Hui & Xu, Jiajun & Liu, Mengqi & Lim, Ming K., 2023. "Vaccine supply chain management: An intelligent system utilizing blockchain, IoT and machine learning," Journal of Business Research, Elsevier, vol. 156(C).
    13. Hongmei Sun & Fuminori Toyasaki & Ioanna Falagara Sigala, 2023. "Incentivizing at‐risk production capacity building for COVID‐19 vaccines," Production and Operations Management, Production and Operations Management Society, vol. 32(5), pages 1550-1566, May.
    14. Stephen E. Chick & Sameer Hasija & Javad Nasiry, 2017. "Information Elicitation and Influenza Vaccine Production," Operations Research, INFORMS, vol. 65(1), pages 75-96, February.
    15. Jahani, Hamed & Chaleshtori, Amir Eshaghi & Khaksar, Seyed Mohammad Sadegh & Aghaie, Abdollah & Sheu, Jiuh-Biing, 2022. "COVID-19 vaccine distribution planning using a congested queuing system—A real case from Australia," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 163(C).
    16. Osman Y. Özaltın & Oleg A. Prokopyev & Andrew J. Schaefer, 2018. "Optimal Design of the Seasonal Influenza Vaccine with Manufacturing Autonomy," INFORMS Journal on Computing, INFORMS, vol. 30(2), pages 371-387, May.
    17. Robbins, Matthew J. & Lunday, Brian J., 2016. "A bilevel formulation of the pediatric vaccine pricing problem," European Journal of Operational Research, Elsevier, vol. 248(2), pages 634-645.
    18. Feiyu Guo & Erbao Cao, 2020. "Does Reference Dependence Impact Intervention Mechanisms in Vaccine Markets?," Sustainability, MDPI, vol. 12(16), pages 1-28, August.
    19. Ece Zeliha Demirci & Nesim Kohen Erkip, 2020. "Designing intervention scheme for vaccine market: a bilevel programming approach," Flexible Services and Manufacturing Journal, Springer, vol. 32(2), pages 453-485, June.
    20. Anil Aswani & Zuo-Jun Max Shen & Auyon Siddiq, 2019. "Data-Driven Incentive Design in the Medicare Shared Savings Program," Operations Research, INFORMS, vol. 67(4), pages 1002-1026, July.

    Corrections

    All material on this site has been provided by the respective publishers and authors. You can help correct errors and omissions. When requesting a correction, please mention this item's handle: RePEc:eee:proeco:v:268:y:2024:i:c:s0925527323003547. See general information about how to correct material in RePEc.

    If you have authored this item and are not yet registered with RePEc, we encourage you to do it here. This allows to link your profile to this item. It also allows you to accept potential citations to this item that we are uncertain about.

    If CitEc recognized a bibliographic reference but did not link an item in RePEc to it, you can help with this form .

    If you know of missing items citing this one, you can help us creating those links by adding the relevant references in the same way as above, for each refering item. If you are a registered author of this item, you may also want to check the "citations" tab in your RePEc Author Service profile, as there may be some citations waiting for confirmation.

    For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: Catherine Liu (email available below). General contact details of provider: http://www.elsevier.com/locate/ijpe .

    Please note that corrections may take a couple of weeks to filter through the various RePEc services.

    IDEAS is a RePEc service. RePEc uses bibliographic data supplied by the respective publishers.