IDEAS home Printed from https://ideas.repec.org/a/gam/jsusta/v12y2020i16p6371-d395913.html
   My bibliography  Save this article

Does Reference Dependence Impact Intervention Mechanisms in Vaccine Markets?

Author

Listed:
  • Feiyu Guo

    (College of Economics and Trade, Hunan University, Changsha 410079, China
    Hunan Province Key Laboratory of Logistics Information and Simulation Technology, Changsha 410079, China)

  • Erbao Cao

    (College of Economics and Trade, Hunan University, Changsha 410079, China
    Hunan Province Key Laboratory of Logistics Information and Simulation Technology, Changsha 410079, China)

Abstract

Prior research suggests that, to maintain sustainable health, inefficient vaccine markets need to be intervened by government subsidy. However, the effectiveness of these intervention mechanisms is often reduced by the absence of reference dependence preference. Our paper introduces this preference as the psychological disutility of overproduction and underproduction, and then uses game-theoretic way to find that reference dependence has implications on one-sided (pure demand or supply side) and two-sided intervention mechanisms. (i) The positive impact is that this preference helps both pure demand-sided and specific two-sided intervention mechanisms not only to maximize social welfare, but also to achieve diverse targets: pure demand-sided one reduces government interventions while specific two-sided ones achieves budget neutrality. (ii) The negative impact is that, although maximizing social welfare, reference dependence makes general two-sided intervention mechanisms complex. This complexity is reflected in differences in intervention’s extent (i.e., a change in payment extent used to address inefficient vaccine markets) and structure (i.e., an adjustment from subsidy alone to subsidy/tax/zero schemes). These finds guide governments with diverse targets to design the corresponding intervention mechanisms to maintain sustainable health.

Suggested Citation

  • Feiyu Guo & Erbao Cao, 2020. "Does Reference Dependence Impact Intervention Mechanisms in Vaccine Markets?," Sustainability, MDPI, vol. 12(16), pages 1-28, August.
  • Handle: RePEc:gam:jsusta:v:12:y:2020:i:16:p:6371-:d:395913
    as

    Download full text from publisher

    File URL: https://www.mdpi.com/2071-1050/12/16/6371/pdf
    Download Restriction: no

    File URL: https://www.mdpi.com/2071-1050/12/16/6371/
    Download Restriction: no
    ---><---

    References listed on IDEAS

    as
    1. 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.
    2. Becker-Peth, Michael & Thonemann, Ulrich W., 2016. "Reference points in revenue sharing contracts—How to design optimal supply chain contracts," European Journal of Operational Research, Elsevier, vol. 249(3), pages 1033-1049.
    3. Teck-Hua Ho & Noah Lim & Tony Haitao Cui, 2010. "Reference Dependence in Multilocation Newsvendor Models: A Structural Analysis," Management Science, INFORMS, vol. 56(11), pages 1891-1910, November.
    4. Botond Kőszegi & Matthew Rabin, 2006. "A Model of Reference-Dependent Preferences," The Quarterly Journal of Economics, President and Fellows of Harvard College, vol. 121(4), pages 1133-1165.
    5. Danqin Yang & Tiaojun Xiao, 2017. "Coordination of a supply chain with loss-averse consumers in service quality," International Journal of Production Research, Taylor & Francis Journals, vol. 55(12), pages 3411-3430, June.
    6. Tinglong Dai & Soo-Haeng Cho & Fuqiang Zhang, 2016. "Contracting for On-Time Delivery in the U.S. Influenza Vaccine Supply Chain," Manufacturing & Service Operations Management, INFORMS, vol. 18(3), pages 332-346, July.
    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. Stephen E. Chick & Sameer Hasija & Javad Nasiry, 2017. "Information Elicitation and Influenza Vaccine Production," Operations Research, INFORMS, vol. 65(1), pages 75-96, February.
    9. Anantaram Balakrishnan & Michael S. Pangburn & Euthemia Stavrulaki, 2004. ""Stack Them High, Let 'em Fly": Lot-Sizing Policies When Inventories Stimulate Demand," Management Science, INFORMS, vol. 50(5), pages 630-644, May.
    10. 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.
    11. Zhou Xideng & Xu Bing & Xie Fei & Li Yu, 2020. "Research on Quality Decisions and Coordination with Reference Effect in Dual-Channel Supply Chain," Sustainability, MDPI, vol. 12(6), pages 1-23, March.
    12. Necati Tereyagoglu & Senthil Veeraraghavan, 2012. "Selling to Conspicuous Consumers: Pricing, Production, and Sourcing Decisions," Management Science, INFORMS, vol. 58(12), pages 2168-2189, December.
    13. Daniel Kahneman & Amos Tversky, 2013. "Prospect Theory: An Analysis of Decision Under Risk," World Scientific Book Chapters, in: Leonard C MacLean & William T Ziemba (ed.), HANDBOOK OF THE FUNDAMENTALS OF FINANCIAL DECISION MAKING Part I, chapter 6, pages 99-127, World Scientific Publishing Co. Pte. Ltd..
    14. Karen Donohue & Özalp Özer, 2020. "Behavioral Operations: Past, Present, and Future," Manufacturing & Service Operations Management, INFORMS, vol. 22(1), pages 191-202, January.
    15. Meng Li, 2019. "Overconfident Distribution Channels," Production and Operations Management, Production and Operations Management Society, vol. 28(6), pages 1347-1365, June.
    16. Daniela Caso & Valentina Carfora & Chiara Starace & Mark Conner, 2019. "Key Factors Influencing Italian Mothers’ Intention to Vaccinate Sons against HPV: The Influence of Trust in Health Authorities, Anticipated Regret and Past Behaviour," Sustainability, MDPI, vol. 11(23), pages 1-12, December.
    17. Deng Xu & Yong Long, 2019. "The Impact of Government Subsidy on Renewable Microgrid Investment Considering Double Externalities," Sustainability, MDPI, vol. 11(11), pages 1-15, June.
    18. Tony Haitao Cui & Jagmohan S. Raju & Z. John Zhang, 2007. "Fairness and Channel Coordination," Management Science, INFORMS, vol. 53(8), pages 1303-1314, August.
    19. Terry A. Taylor & Wenqiang Xiao, 2014. "Subsidizing the Distribution Channel: Donor Funding to Improve the Availability of Malaria Drugs," Management Science, INFORMS, vol. 60(10), pages 2461-2477, October.
    20. Chang Su & Xiaojing Liu & Wenyi Du, 2020. "Green Supply Chain Decisions Considering Consumers’ Low-Carbon Awareness under Different Government Subsidies," Sustainability, MDPI, vol. 12(6), pages 1-12, March.
    21. Xing Yin & Xiaolin Chen & Xiaolin Xu & Lianmin Zhang, 2020. "Tax or Subsidy? Optimal Carbon Emission Policy: A Supply Chain Perspective," Sustainability, MDPI, vol. 12(4), pages 1-13, February.
    22. Jonathan Chemama & Maxime C. Cohen & Ruben Lobel & Georgia Perakis, 2019. "Consumer Subsidies with a Strategic Supplier: Commitment vs. Flexibility," Management Science, INFORMS, vol. 65(2), pages 681-713, February.
    23. Stephen E. Chick & Sameer Hasija & Javad Nasiry, 2017. "Information Elicitation and Influenza Vaccine Production," Operations Research, INFORMS, vol. 65(1), pages 75-96, February.
    24. Maurice E. Schweitzer & Gérard P. Cachon, 2000. "Decision Bias in the Newsvendor Problem with a Known Demand Distribution: Experimental Evidence," Management Science, INFORMS, vol. 46(3), pages 404-420, March.
    25. 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.
    26. Dan Yamin & Arieh Gavious, 2013. "Incentives' Effect in Influenza Vaccination Policy," Management Science, INFORMS, vol. 59(12), pages 2667-2686, December.
    27. 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.
    28. Samuel Bowles & Sandra Polania-Reyes, 2012. "Economic Incentives and Social Preferences: Substitutes or Complements?," Journal of Economic Literature, American Economic Association, vol. 50(2), pages 368-425, June.
    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. Guo, Feiyu & Cao, Erbao, 2021. "Can reference points explain vaccine hesitancy? A new perspective on their formation and updating," Omega, Elsevier, vol. 99(C).
    2. 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.
    3. 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.
    4. 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).
    5. 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.
    6. Lotty E. Westerink‐Duijzer & Loe P. J. Schlicher & Marieke Musegaas, 2020. "Core Allocations for Cooperation Problems in Vaccination," Production and Operations Management, Production and Operations Management Society, vol. 29(7), pages 1720-1737, July.
    7. 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.
    8. 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).
    9. 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.
    10. Becker-Peth, Michael & Thonemann, Ulrich W., 2016. "Reference points in revenue sharing contracts—How to design optimal supply chain contracts," European Journal of Operational Research, Elsevier, vol. 249(3), pages 1033-1049.
    11. Kirshner, Samuel N. & Shao, Lusheng, 2018. "Internal and external reference effects in a two-tier supply chain," European Journal of Operational Research, Elsevier, vol. 267(3), pages 944-957.
    12. Wei, Ying & Xiong, Sijia & Li, Feng, 2019. "Ordering bias with two reference profits: Exogenous benchmark and minimum requirement," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 128(C), pages 229-250.
    13. 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).
    14. Liu, Chao & Chen, Weidong, 2019. "Decision making in green supply chains under the impact of the stochastic and multiple-variable dependent reference point," Transportation Research Part E: Logistics and Transportation Review, Elsevier, vol. 128(C), pages 443-469.
    15. Stephen E. Chick & Sameer Hasija & Javad Nasiry, 2017. "Information Elicitation and Influenza Vaccine Production," Operations Research, INFORMS, vol. 65(1), pages 75-96, February.
    16. Vipin, B. & Amit, R.K., 2019. "Describing decision bias in the newsvendor problem: A prospect theory model," Omega, Elsevier, vol. 82(C), pages 132-141.
    17. Qingwei Wang & Meimei Zheng & Wei Weng, 2023. "Sourcing decisions with loss aversion under yield and demand randomness," OR Spectrum: Quantitative Approaches in Management, Springer;Gesellschaft für Operations Research e.V., vol. 45(2), pages 661-710, June.
    18. Tian Bai & Samuel N. Kirshner & Meng Wu, 2021. "Managing Overconfident Newsvendors: A Target‐Setting Approach," Production and Operations Management, Production and Operations Management Society, vol. 30(11), pages 3967-3986, November.
    19. Lisa M. Scheele & Ulrich W. Thonemann & Marco Slikker, 2018. "Designing Incentive Systems for Truthful Forecast Information Sharing Within a Firm," Management Science, INFORMS, vol. 64(8), pages 3690-3713, August.
    20. Stephen E. Chick & Sameer Hasija & Javad Nasiry, 2017. "Information Elicitation and Influenza Vaccine Production," Operations Research, INFORMS, vol. 65(1), pages 75-96, February.

    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:gam:jsusta:v:12:y:2020:i:16:p:6371-:d:395913. 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: MDPI Indexing Manager (email available below). General contact details of provider: https://www.mdpi.com .

    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.