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Price and capacity decisions in a telemedicine service system under government subsidy policy

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  • Xiaoli Wang
  • Zhiyong Zhang
  • Lei Yang
  • Jun Zhao

Abstract

With the development of information and communication technologies, telemedicine has been widely used in different healthcare sectors. In this paper, we study a telemedicine service system consisting of a non-profit general hospital (GH) and a for-profit telemedicine firm (TF). The GH is subsidised by the government, which aims at maximising social welfare. We adopt a mixed duopoly game to obtain the optimal price and capacity decisions of the GH and the TF. The interaction between the GH and the TF is specifically examined. Nash equilibrium strategies of the telemedicine service system are discussed under the government subsidy policy. Results show that the influence between the GH and the TF is unilateral. The service price and capacity decisions of the TF will not affect the capacity decision of the GH. Besides, the government subsidy policy on the GH can improve the total patients' utility in the GH and the profit of the TF, but the impacts become insignificant as the subsidy budget increasing. Numerical experiments further demonstrate that the introduction of telemedicine is effective in reducing patients' waiting times and improving social welfare, especially in rural areas that lack medical resources.

Suggested Citation

  • Xiaoli Wang & Zhiyong Zhang & Lei Yang & Jun Zhao, 2021. "Price and capacity decisions in a telemedicine service system under government subsidy policy," International Journal of Production Research, Taylor & Francis Journals, vol. 59(17), pages 5130-5143, September.
    • Handle: RePEc:taf:tprsxx:v:59:y:2021:i:17:p:5130-5143
    DOI: 10.1080/00207543.2020.1774090
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    Cited by:

    1. Jingpei Ma & Xuejun Sun, 2023. "Green technology licensing: Evaluating government subsidies based on different efficiency levels across competitors," Managerial and Decision Economics, John Wiley & Sons, Ltd., vol. 44(4), pages 1920-1934, June.
    2. Zhong, Yuanguang & Yang, Tong & Zillmann, Stefan & Cao, Bin, 2022. "The role of government regulatory policies in financing capital-constrained retailers under competition," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 157(C).
    3. Zhou, Cuihua & Hao, Yifei & Lan, Yanfei & Li, Weifeng, 2023. "To introduce or not? Strategic analysis of hospital operations with telemedicine," European Journal of Operational Research, Elsevier, vol. 304(1), pages 292-307.
    4. Deepak Singhal & Sarat Kumar Jena & Satyabrata Aich & Sushanta Tripathy & Hee-Cheol Kim, 2021. "Remanufacturing for Circular Economy: Understanding the Impact of Manufacturer’s Incentive under Price Competition," Sustainability, MDPI, vol. 13(21), pages 1-19, October.
    5. Wang, Jian-Jun & Zhang, Xinmou & Shi, Jim Junmin, 2023. "Hospital dual-channel adoption decisions with telemedicine referral and misdiagnosis," Omega, Elsevier, vol. 119(C).

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