Information Elicitation and Influenza Vaccine Production

42 Pages Posted: 23 Jan 2012 Last revised: 18 Nov 2014

See all articles by Stephen E. Chick

Stephen E. Chick

INSEAD - Technology and Operations Management

Sameer Hasija

INSEAD - Technology and Operations Management

Javad Nasiry

Hong Kong University of Science & Technology (HKUST); Hong Kong University of Science & Technology (HKUST) - Department of Information Systems, Business Statistics and Operations Management

Date Written: July 2, 2013

Abstract

We explore the procurement of influenza vaccines by a government whose objective is to minimize the expected social costs (including vaccine, vaccine administration, and influenza treatment costs) when a for-profit vaccine supplier has production yield uncertainty, private information about its productivity (adverse selection) and potentially unverifiable production effort (moral hazard). Timeliness is important – costs for both the supplier and the government procurer may increase if part of the vaccine order is delivered after a scheduled delivery date. We theoretically derive the optimal menu of output-based contracts to minimize information rent, and numerically identify key drivers of that information rent. We also present a novel way to eliminate that information rent if the manufacturer’s effort is also verifiable, a counter intuitive result because the manufacturer has private productivity information. This provides an upper bound on how much a government should spend to monitor the manufacturer’s effort.

Keywords: Supply Chain, Incentive Design, Health Care, Epidemiology, Procurement, Public Good

Suggested Citation

Chick, Stephen E. and Hasija, Sameer and Nasiry, Javad, Information Elicitation and Influenza Vaccine Production (July 2, 2013). INSEAD Working Paper No. 2012/09/TOM/INSEAD Social Innovation Centre. Available at SSRN: https://ssrn.com/abstract=1990277 or http://dx.doi.org/10.2139/ssrn.1990277

Stephen E. Chick (Contact Author)

INSEAD - Technology and Operations Management ( email )

Boulevard de Constance
77 305 Fontainebleau Cedex
France

HOME PAGE: http://faculty.insead.edu/chick/

Sameer Hasija

INSEAD - Technology and Operations Management ( email )

Boulevard de Constance
77 305 Fontainebleau Cedex
France

Javad Nasiry

Hong Kong University of Science & Technology (HKUST) ( email )

Clearwater Bay
Kowloon, 999999
Hong Kong

Hong Kong University of Science & Technology (HKUST) - Department of Information Systems, Business Statistics and Operations Management ( email )

Clear Water Bay
Kowloon
Hong Kong

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