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Impact of management models on revenue sharing for signaling medical equipment reliability

Author

Listed:
  • Yu-Hung Chen
  • Ling-Chieh Kung
  • Jiun-Yu Yu
  • Hsin-Jung Tsai
  • Yu Jen Wang

Abstract

This paper examines the contracting problem between a medical equipment vendor and a hospital in the healthcare industry. Many medical treatments depend heavily on the reliability of newly developed equipment, which typically encompasses private information on the part of the vendor. We built a game-theoretic model to examine the optimal contract a vendor can offer to prevent hospitals from underpaying for a reliable machine. First, the contract format including revenue sharing may serve as a signaling device of reliability. Second, the management model of a hospital has a strong impact on contract design. In particular, the vendor is better able to signal its reliability through revenue sharing to a non-profit hospital than to a for-profit hospital. Lastly, revenue sharing becomes more attractive to vendors as hospitals are more concerned about social welfare.

Suggested Citation

  • Yu-Hung Chen & Ling-Chieh Kung & Jiun-Yu Yu & Hsin-Jung Tsai & Yu Jen Wang, 2022. "Impact of management models on revenue sharing for signaling medical equipment reliability," Journal of the Operational Research Society, Taylor & Francis Journals, vol. 73(6), pages 1379-1392, June.
    • Handle: RePEc:taf:tjorxx:v:73:y:2022:i:6:p:1379-1392
    DOI: 10.1080/01605682.2021.1907240
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