Truthful Mechanisms for Medical Surplus Product Allocation

57 Pages Posted: 10 Oct 2017 Last revised: 29 May 2018

Can Zhang

Georgia Institute of Technology - The H. Milton Stewart School of Industrial & Systems Engineering (ISyE)

Atalay Atasu

Georgia Institute of Technology - Sustainability

Turgay Ayer

Georgia Institute of Technology - The H. Milton Stewart School of Industrial & Systems Engineering (ISyE)

L. Beril Toktay

Georgia Institute of Technology - Sustainability

Date Written: October 9, 2017

Abstract

We analyze a resource allocation problem faced by Medical Surplus Recovery Organizations (MSROs) that recover medical surplus products to fulfill the needs of under-served healthcare facilities in developing countries. Due to the uncertain, uncontrollable supply and limited information about recipient needs, delivering the right product to the right recipient in MSRO supply chains is particularly challenging. The objective of this study is to identify strategies to improve MSROs' value provision capability. In particular, we propose a mechanism design approach, and determine which recipient to serve at each shipping opportunity based on recipients' reported preference rankings of different products. We find that when MSRO inventory information is shared with recipients, the only truthful mechanism is random selection among recipients, which defeats the purpose of eliciting information. Consequently, we propose two operational strategies to improve MSROs' value provision: i) not sharing MSRO inventory information with recipients; and ii) withholding information regarding other recipients. We characterize the set of truthful mechanisms under each setting, and show that eliminating inventory and competitor information provision both improve MSROs' value provision. Further, we investigate the value of cardinal mechanisms where recipients report their valuations. We show that in our setting, eliciting valuations has no value added beyond eliciting rankings under a wide class of implementable mechanisms. Finally, we present a calibrated numerical study based on historical data from a partner MSRO, and show that a strategy consisting of a ranking-based mechanism in conjunction with eliminating inventory and competitor information can significantly improve MSROs' value provision.

Keywords: Socially Responsible Operations; Humanitarian Supply Chains; Medical Surplus; Resource Allocation; Mechanism Design

Suggested Citation

Zhang, Can and Atasu, Atalay and Ayer, Turgay and Toktay, L. Beril, Truthful Mechanisms for Medical Surplus Product Allocation (October 9, 2017). Georgia Tech Scheller College of Business Research Paper No. 17-38. Available at SSRN: https://ssrn.com/abstract=3050085 or http://dx.doi.org/10.2139/ssrn.3050085

Can Zhang (Contact Author)

Georgia Institute of Technology - The H. Milton Stewart School of Industrial & Systems Engineering (ISyE) ( email )

765 Ferst Drive
Atlanta, GA 30332-0205
United States

Atalay Atasu

Georgia Institute of Technology - Sustainability ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States

Turgay Ayer

Georgia Institute of Technology - The H. Milton Stewart School of Industrial & Systems Engineering (ISyE) ( email )

765 Ferst Drive
Atlanta, GA 30332-0205
United States

L. Beril Toktay

Georgia Institute of Technology - Sustainability ( email )

800 West Peachtree St.
Atlanta, GA 30308
United States

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