Coordination of elderly healthcare service supply chain with information asymmetry: Designs of option contracts under different demand distribution statuses

Zhao, Jun

RAIRO - Operations Research - Recherche Opérationnelle, Tome 54 (2020) no. 5, pp. 1291-1307.

Suite au passage du modèle économique de la revue en S20, le texte intégral des articles des années 2019 et 2020 est accessible uniquement sur le site de l'éditeur et est réservé aux abonnés.

This paper studies the issue of demand information asymmetry in an elderly healthcare service (EHS) system represented by a two-echelon elderly healthcare service supply chain (EHSSC) comprising an elderly service integrator (ESI) and a service provider (ESP). The goal of the ESI is to decide on how much service capacity is required for placing orders to the ESP, who directly serves the customers. Considering discrete and continuous demand distribution statuses, a centralised model with symmetric demand information and decentralised models with asymmetric demand information are developed to analyse the optimal ordering decisions and discuss the influence of information asymmetry. Furthermore, option contracts are applied to help coordinate the supply chain under asymmetric demand information based on different demand distribution statuses. Optimal option contract menus are designed for the ESP to promote the information sharing. Results show that the option contract can coordinate the EHSSC with asymmetric demand information under both discrete and continuous demand distribution statuses. The exercise price will be higher under lower demand information than that under higher demand information and the transfer payment will be less under lower demand information than that under higher demand information. Moreover, although the ESI has demand information superiority and can make use of opportunistic behaviour to maximise its own profit, the ESP as the leader can design the option contract to incentive the ESI to achieve true information sharing, and even obtain nearly all of the channel profit.

[1] AgeInternational, Our ageing world, in statistics. https://www.ageinternational.org.uk/policy-and-research/ageing-international-development/ageing-factfile/ (2018).

[2] M. Akan, B. Ata and M.A. Lariviere, Asymmetric information and economies of scale in service contracting. Manuf. Ser. Oper. Manage. 13 (2011) 58–72. | DOI

[3] S. Asian and X. Nie, Coordination in supply chains with uncertain demand and disruption risks: existence, analysis, and insights. IEEE Trans. Syst. Man Cybernet. Syst. 44 (2014) 1139–1154. | DOI

[4] D. Barnes-Schuster, Y. Bassok and R. Anupindi, Coordination and flexibility in supply contracts with options. Manuf. Serv. Oper. Manage. 4 (2002) 171–207. | DOI

[5] X. Brusset, When manufacturers hold information back from strong suppliers. RAIRO: OR 50 (2016) 553–565. | DOI | Numdam | MR | Zbl

[6] A. Burnetas, S.M. Gilbert and C.E. Smith, Quantity discounts in single-period supply contracts with asymmetric demand information. IIE Trans. 39 (2007) 465–479. | DOI

[7] G.P. Cachon and M.A. Lariviere, Contracting to assure supply: How to share demand forecasts in a supply chain. Manage. Sci. 47 (2001) 629–646. | DOI | Zbl

[8] G.P. Cachon and F. Zhang, Procuring fast delivery: sole sourcing with information asymmetry. Manage. Sci. 52 (2006) 881–896. | DOI | Zbl

[9] C.J. Corbett and X. De Groote, A supplier’s optimal quantity discount policy under asymmetric information. Manage. Sci. 46 (2000) 444–450. | DOI | Zbl

[10] S. Ebrahimi, S.-M. Hosseini-Motlagh and M. Nematollahi, Proposing a delay in payment contract for coordinating a two-echelon periodic review supply chain with stochastic promotional effort dependent demand. Int. J. Mach. Learn. Cyber. 10 (2019) 1037–1050. | DOI

[11] P. Egri and J. Vancza, Channel coordination with the newsvendor model using asymmetric information. Int. J. Prod. Econ. 135 (2012) 491–499. | DOI

[12] Y.Y. Fu, E.W.T. Chui, W.S. Kan and L. Ko, Improving primary level home and community care services for older people: the case of hong kong. Int. J. Soc. Welfare 27 (2018) 52–61. | DOI

[13] S.-M. Hosseini-Motlagh, M. Nematollahi, M. Johari and B.R. Sarker, A collaborative model for coordination of monopolistic manufacturer’s promotional efforts and competing duopolistic retailers’ trade credits. Int. J. Prod. Econ. 204 (2018) 108–122. | DOI

[14] M. Jazinaninejad, M. Seyed Hosseini, S.-M. Hosseini-Motlagh and M. Nematollahi, Coordinated decision-making on manufacturer’s EPQ-based and buyer’s period review inventory policies with stochastic price-sensitive demand: a credit option approach. RAIRO: OR 53 (2019) 1129–1154. | DOI | Numdam | MR

[15] Y. Jiang and A. Seidmann, Capacity planning and performance contracting for service facilities. Decis. Support Syst. 58 (2014) 31–42. | DOI

[16] M. Johari, S.-M. Hosseini-Motlagh, M. Nematollahi, M. Goh and J. Ignatius, Bi-level credit period coordination for periodic review inventory system with price-credit dependent demand under time value of money. Transp. Res. Part E Transp. Rev. 114 (2018) 270–291. | DOI

[17] Y. Li, X. Xu, X. Zhao, J.H.Y. Yeung and F. Ye, Supply chain coordination with controllable lead time and asymmetric information. Eur. J. Oper. Res. 217 (2012) 108–119. | DOI | MR | Zbl

[18] L. Liang, X. Wang and J. Gao, An option contract pricing model of relief material supply chain. Omega 40 (2012) 594–600. | DOI

[19] J.-Y. Lim, The effect of patient’s asymmetric information problem on elderly use of medical care. Appl. Econ. 39 (2007) 2133–2142. | DOI

[20] J.-Y. Lim and C. Jo, The effect of patient’s asymmetric information problem on medical care utilization with consideration of a patient’s ex-ante health status. Hitotsubashi J. Econ. 50 (2009) 37–58.

[21] H. Liu and O. Özer, Channel incentives in sharing new product demand information and robust contracts. Eur. J. Oper. Res. 207 (2010) 1341–1349. | DOI | MR | Zbl

[22] X. Liu, Q. Gou, L. Alwan and L. Liang, Option contracts: a solution for overloading problems in the delivery service supply chain. J. Oper. Res. Soc. 67 (2016) 187–197. | DOI

[23] R.L. Mendoza, Information asymmetries and risk management in healthcare markets: the US affordable care act in retrospect. J. Econ. Issues 51 (2017) 520–540. | DOI

[24] K.H. Miller, C. Ziegler, R. Greenberg, P.D. Patel and M.B. Carter, Why physicians should share PDA/smartphone findings with their patients: a brief report. J. Health Commun. 17 (2012) 54–61. | DOI

[25] A.C. Muhlbacher, V.E. Amelung and C. Juhnke, Contract design: the problem of information asymmetry. Int. J. Integr. Care 18 (2018) 1. | DOI

[26] R.B. Myerson, Incentive compatibility and the bargaining problem. Econometrica 47 (1979) 61–73. | DOI | MR | Zbl

[27] M. Nematollahi, S.-M. Hosseini-Motlagh, J. Ignatius, M. Goh and M.S. Nia, Coordinating a socially responsible pharmaceutical supply chain under periodic review replenishment policies. J. Clean. Prod. 172 (2018) 2876–2891. | DOI

[28] M. Nouri, S.-M. Hosseini-Motlagh, M. Nematollahi and B.R. Sarker, Coordinating manufacturer’s innovation and retailer’s promotion and replenishment using a compensation-based wholesale price contract. Int. J. Prod. Econ. 198 (2018) 11–24. | DOI

[29] South China Morning Post, China Offers Incentives to Develop Elderly Care in Face of “Alarming” Population Ageing. South China Morning Post, Hong Kong (2015).

[30] Y. Shen and S.P. Willems, Coordinating a channel with asymmetric cost information and the manufacturer’s optimality. Int. J. Prod. Econ. 135 (2012) 125–135. | DOI

[31] P. Shi and W. Zhang, Private information in healthcare utilization: specification of a copula-based hurdle model. J. Roy. Statist. Soc. Ser. A (Statist. Soc.) 178 (2015) 337–361. | DOI | MR

[32] N. Shukla, J. Keast and D. Ceglarek, Modelling variations in hospital service delivery based on real time locating information. Appl. Math. Model. 38 (2014) 878–893. | DOI

[33] T. Tran and R. Desiraju, Group-buying and channel coordination under asymmetric information. Eur. J. Oper. Res. 256 (2017) 68–75. | DOI | MR | Zbl

[34] Department of Economic United Nations and Population Division Social Affairs. World population ageing 2017 –– highlights (st/esa/ser.a/397) (2017).

[35] W. Xie, Y. Zhao, Z. Jiang and P.S. Chow, Optimizing product service system by franchise fee contracts under information asymmetry. Ann. Oper. Res. 240 (2013) 12. | MR

[36] H. Xu, Managing production and procurement through option contracts in supply chains with random yield. Int. J. Prod. Econ. 126 (2010) 306–313. | DOI

[37] X. Xu, Y. Ji, Y. Bian and Y. Sun, Service outsourcing under co-opetition and information asymmetry. J. Oper. Res. Soc. 68 (2017) 666–677. | DOI

[38] Y. Yan, R. Zhao and Y. Lan, Asymmetric retailers with different moving sequences: group buying vs. individual purchasing. Eur. J. Oper. Res. 261 (2017) 903–917. | DOI | MR

[39] Y.-H. Yan, C.-M. Kung, S.-C. Fang and Y. Chen, Transparency of mandatory information disclosure and concerns of health services providers and consumers. Int. J. Environ. Res. Publ. Health 14 (2017) 53. | DOI

[40] L. Yang, R. Tang and K. Chen, Call, put and bidirectional option contracts in agricultural supply chains with sales effort. Appl. Math. Model. 47 (2017) 1–16. | DOI | MR

[41] Y. Zhao, S. Wang, T.C.E. Cheng and X. Yang, Z. Huang, Coordination of supply chains by option contracts: a cooperative game theory approach. Eur. J. Oper. Res. 207 (2010) 668–675. | DOI | MR | Zbl