IDEAS home Printed from https://ideas.repec.org/a/inm/ormnsc/v58y2012i6p1072-1091.html
   My bibliography  Save this article

Consumption Externality and Yield Uncertainty in the Influenza Vaccine Supply Chain: Interventions in Demand and Supply Sides

Author

Listed:
  • Kenan Arifoglu

    (Department of Industrial Engineering and Management Sciences, Northwestern University, Evanston, Illinois 60208)

  • Sarang Deo

    (Indian School of Business, Gachibowli, Hyderabad 500032, India)

  • Seyed M. R. Iravani

    (Department of Industrial Engineering and Management Sciences, Northwestern University, Evanston, Illinois 60208)

Abstract

We study the impact of yield uncertainty (supply side) and self-interested consumers (demand side) on the inefficiency in the influenza vaccine supply chain. Previous economic studies, focusing on demand side, find that the equilibrium demand is always less than the socially optimal demand because self-interested individuals do not internalize the social benefit of protecting others via reduced infectiousness (positive externality). In contrast, we show that the equilibrium demand can be greater than the socially optimal demand after accounting for the limited supply due to yield uncertainty and manufacturer's incentives. The main driver for this result is a second (negative) externality: Self-interested individuals ignore that vaccinating people with high infection costs is more beneficial for the society when supply is limited. We show that the extent of the negative externality can be reduced through more efficient and less uncertain allocation mechanisms. To investigate the relative effectiveness of government interventions on supply and demand sides under various demand and supply characteristics, we construct two partially centralized scenarios where the social planner (i.e., government) intervenes either on the demand side or the supply side, but not both. We conduct an extensive numerical analysis. This paper was accepted by Yossi Aviv, operations management.

Suggested Citation

  • Kenan Arifoglu & Sarang Deo & Seyed M. R. Iravani, 2012. "Consumption Externality and Yield Uncertainty in the Influenza Vaccine Supply Chain: Interventions in Demand and Supply Sides," Management Science, INFORMS, vol. 58(6), pages 1072-1091, June.
    • Handle: RePEc:inm:ormnsc:v:58:y:2012:i:6:p:1072-1091
    DOI: 10.1287/mnsc.1110.1469
    as

    Download full text from publisher

    File URL: http://dx.doi.org/10.1287/mnsc.1110.1469
    Download Restriction: no
    File URL: https://libkey.io/10.1287/mnsc.1110.1469?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
    ---><---

    References listed on IDEAS

    as
    1. Gérard P. Cachon & Robert Swinney, 2009. "Purchasing, Pricing, and Quick Response in the Presence of Strategic Consumers," Management Science, INFORMS, vol. 55(3), pages 497-511, March.
    2. Guillermo Gallego & Özge Şahin, 2010. "Revenue Management with Partially Refundable Fares," Operations Research, INFORMS, vol. 58(4-part-1), pages 817-833, August.
    3. Wilfred Amaldoss & Sanjay Jain, 2005. "Conspicuous Consumption and Sophisticated Thinking," Management Science, INFORMS, vol. 51(10), pages 1449-1466, October.
    4. Necati Tereyagoglu & Senthil Veeraraghavan, 2012. "Selling to Conspicuous Consumers: Pricing, Production, and Sourcing Decisions," Management Science, INFORMS, vol. 58(12), pages 2168-2189, December.
    5. Candace Arai Yano & Hau L. Lee, 1995. "Lot Sizing with Random Yields: A Review," Operations Research, INFORMS, vol. 43(2), pages 311-334, April.
    6. Geoffard, Pierre-Yves & Philipson, Tomas, 1996. "Rational Epidemics and Their Public Control," International Economic Review, Department of Economics, University of Pennsylvania and Osaka University Institute of Social and Economic Research Association, vol. 37(3), pages 603-624, August.
    7. James D. Dana, Jr. & Nicholas C. Petruzzi, 2001. "Note: The Newsvendor Model with Endogenous Demand," Management Science, INFORMS, vol. 47(11), pages 1488-1497, November.
    8. 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.
    9. Laura J. Kornish & Ralph L. Keeney, 2008. "Repeated Commit-or-Defer Decisions with a Deadline: The Influenza Vaccine Composition," Operations Research, INFORMS, vol. 56(3), pages 527-541, June.
    10. Brito, Dagobert L. & Sheshinski, Eytan & Intriligator, Michael D., 1991. "Externalities and compulsary vaccinations," Journal of Public Economics, Elsevier, vol. 45(1), pages 69-90, June.
    11. Xuanming Su & Fuqiang Zhang, 2008. "Strategic Customer Behavior, Commitment, and Supply Chain Performance," Management Science, INFORMS, vol. 54(10), pages 1759-1773, October.
    12. Sarang Deo & Charles J. Corbett, 2009. "Cournot Competition Under Yield Uncertainty: The Case of the U.S. Influenza Vaccine Market," Manufacturing & Service Operations Management, INFORMS, vol. 11(4), pages 563-576, July.
    13. Joseph T. Wu & Lawrence M. Wein & Alan S. Perelson, 2005. "Optimization of Influenza Vaccine Selection," Operations Research, INFORMS, vol. 53(3), pages 456-476, June.
    14. Soo-Haeng Cho, 2010. "The Optimal Composition of Influenza Vaccines Subject to Random Production Yields," Manufacturing & Service Operations Management, INFORMS, vol. 12(2), pages 256-277, November.
    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. Stephen E. Chick & Sameer Hasija & Javad Nasiry, 2017. "Information Elicitation and Influenza Vaccine Production," Operations Research, INFORMS, vol. 65(1), pages 75-96, February.
    2. Soo-Haeng Cho, 2010. "The Optimal Composition of Influenza Vaccines Subject to Random Production Yields," Manufacturing & Service Operations Management, INFORMS, vol. 12(2), pages 256-277, November.
    3. Stephen E. Chick & Sameer Hasija & Javad Nasiry, 2017. "Information Elicitation and Influenza Vaccine Production," Operations Research, INFORMS, vol. 65(1), pages 75-96, February.
    4. Yarmand, Hamed & Ivy, Julie S. & Denton, Brian & Lloyd, Alun L., 2014. "Optimal two-phase vaccine allocation to geographically different regions under uncertainty," European Journal of Operational Research, Elsevier, vol. 233(1), pages 208-219.
    5. Guo, Feiyu & Cao, Erbao, 2021. "Can reference points explain vaccine hesitancy? A new perspective on their formation and updating," Omega, Elsevier, vol. 99(C).
    6. Alexandar Angelus & Özalp Özer, 2022. "On the large‐scale production of a new vaccine," Production and Operations Management, Production and Operations Management Society, vol. 31(7), pages 3043-3060, July.
    7. 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.
    8. 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.
    9. 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.
    10. Osman Y. Özaltın & Oleg A. Prokopyev & Andrew J. Schaefer & Mark S. Roberts, 2011. "Optimizing the Societal Benefits of the Annual Influenza Vaccine: A Stochastic Programming Approach," Operations Research, INFORMS, vol. 59(5), pages 1131-1143, October.
    11. 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.
    12. Maria C. Jansen & Osman Y. Özaltın, 2017. "Note on Cournot Competition Under Yield Uncertainty," Manufacturing & Service Operations Management, INFORMS, vol. 19(2), pages 305-308, May.
    13. Gérard P. Cachon & Santiago Gallino & Marcelo Olivares, 2019. "Does Adding Inventory Increase Sales? Evidence of a Scarcity Effect in U.S. Automobile Dealerships," Management Science, INFORMS, vol. 65(4), pages 1469-1485, April.
    14. 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.
    15. Gérard P. Cachon, 2020. "A Research Framework for Business Models: What Is Common Among Fast Fashion, E-Tailing, and Ride Sharing?," Management Science, INFORMS, vol. 66(3), pages 1172-1192, March.
    16. 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).
    17. Soo-Haeng Cho & Christopher S. Tang, 2013. "Advance Selling in a Supply Chain Under Uncertain Supply and Demand," Manufacturing & Service Operations Management, INFORMS, vol. 15(2), pages 305-319, May.
    18. Gérard P. Cachon & Pnina Feldman, 2015. "Price Commitments with Strategic Consumers: Why It Can Be Optimal to Discount More Frequently … Than Optimal," Manufacturing & Service Operations Management, INFORMS, vol. 17(3), pages 399-410, July.
    19. Peng Sun & Liu Yang & Francis de Véricourt, 2009. "Selfish Drug Allocation for Containing an International Influenza Pandemic at the Onset," Operations Research, INFORMS, vol. 57(6), pages 1320-1332, December.
    20. 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.

    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:inm:ormnsc:v:58:y:2012:i:6:p:1072-1091. 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: Chris Asher (email available below). General contact details of provider: https://edirc.repec.org/data/inforea.html .

    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.