Department Seminar: Kenan Arifoglu, Northwestern University - Monday, Jan 30, 2012 @ 8 AM, IOE 1680
Consumption Externality and Yield Uncertainty in the Influenza Vaccine Supply Chain: Interventions in Demand and Supply Sides
Abstract: We study the impact of yield uncertainty (supply side) and self-interested consumers (demand side) on the inefficiency in the influenza vaccine supply chain. Previous economic studies, focusing on demand side, find that the equilibrium demand is always less than the socially optimal demand since self-interested individuals do not internalize the social benefit of protecting others via reduced infectiousness (positive externality). In contrast, we show that the equilibrium demand can be greater than the socially optimal demand after accounting for the limited supply due to yield uncertainty and manufacturer’s incentives. The main driver for this result is a second (negative) externality: self-interested individuals ignore that vaccinating people with high infection costs is more beneficial for the society when supply is limited. We show that the extent of the negative externality can be reduced through more efficient and less uncertain allocation mechanisms. In order to investigate the relative effectiveness of government interventions on supply and demand sides under various demand and supply characteristics, we construct two partially centralized scenarios, where the social planner (government) intervenes either on the demand side or the supply side but not both, and conduct an extensive numerical analysis.
Bio: Kenan Arifoglu obtained his PhD at the Industrial Engineering and Management Sciences (IEMS) Department, Northwestern University. Now he holds a postdoctoral position at the Ross School of Business at UM. He received his B.Sc. and M.Sc. Degrees from Koc University (Istanbul, Turkey) in 2005 and 2007, respectively. He also received an M.Sc degree from the IEMS Department of Northwestern University in 2008. His main research interests lie in the areas of healthcare management, supply chain management, production and inventory systems, and pricing and revenue management. He is also interested in stochastic modeling, decision and risk analysis, and service operations.
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