Production Capacity Reserve Strategy of Emergency Medical Supplies: Incentive Model for Nonprofit Organizations

Hua Xiao, Tong Xu, Huyang Xu, Yong Lin, Manjing Sun and Manyi Tan ()
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Hua Xiao: School of Management Science, Chengdu University of Technology, Chengdu 610059, China
Tong Xu: Department of Military Logistics, Army Logistics Academy, Chongqing 401331, China
Huyang Xu: School of Management Science, Chengdu University of Technology, Chengdu 610059, China
Yong Lin: Department of Military Logistics, Army Logistics Academy, Chongqing 401331, China
Manjing Sun: School of Foreign Studies, East China University of Political Science and Law, Shanghai 200042, China
Manyi Tan: School of Management Science, Chengdu University of Technology, Chengdu 610059, China

Sustainability, 2022, vol. 14, issue 18, 1-16

Abstract: In 2020, COVID-19 swept across the globe. To reduce the social harms caused by this public health event, nonprofit organizations (NPOs) cooperated with medical enterprises to produce reserves of emergency medical supplies. In practice, this cooperation was challenged by the different goals of NPOs and medical enterprises and the asymmetry of information between these parties. Enterprises are prone to irregularities or speculative behaviors that can result in insufficient production capacity during public health events, which increase disaster risks. Based on the principal–agent relationship of NPOs and enterprises, this study analyzed a game model between NPOs and enterprises under information asymmetry; constructed an incentive model for reserve emergency medical supply production capacity; and solved the optimal reward and punishment coefficients of NPOs, optimal effort level of enterprises, and benefits of disaster reduction. The study also verified the validity of the model using numerical examples and a sensitivity analysis. In taking up the findings of the study, this paper discusses the effects of several important exogenous variables on the optimal decision strategies of NPOs and enterprises and offers management-related insights for NPOs.

Keywords: emergency medical supplies; incentive model; disaster reduction benefits; principal–agent theory; reserve production capacity (search for similar items in EconPapers)
JEL-codes: O13 Q Q0 Q2 Q3 Q5 Q56 (search for similar items in EconPapers)
Date: 2022
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