Implications of government subsidy on the vaccine product R&D when the buyer is risk averse

Lei Xie; Pengwen Hou; Hongshuai Han

doi:10.1016/j.tre.2020.102220

Implications of government subsidy on the vaccine product R&D when the buyer is risk averse

Transp Res E Logist Transp Rev. 2021 Feb:146:102220. doi: 10.1016/j.tre.2020.102220. Epub 2021 Jan 17.

Authors

Lei Xie¹, Pengwen Hou², Hongshuai Han³

Affiliations

¹ School of Management, Shandong University, Jinan 250100, China.
² Coordinated Innovation Center for Computable Modeling in Management Science, Tianjin University of Finance and Economics, Tianjin 300222, China.
³ College of Management and Economics, Tianjin University, Tianjin 300072, China.

Abstract

This paper analyses the choice of subsidy offered to a vaccine supply chain with a risk-averse buyer. We find that for a higher innovation effort and level of social benefits, the per-unit production subsidy is better when there is a low innovation cost coefficient, a low level of risk aversion, or a high potential demand. Otherwise, under the opposite conditions, the R&D innovation effort subsidy should be selected. Furthermore, from an evolutionary game theoretical perspective, we also present the stability performance for the subsidies, and the results show that when the manufacturer's innovation cost coefficient is relatively low, the more profitable per-unit production subsidy may be abandoned due to its performance instability.

Keywords: Accumulated social benefit; Evolutionarily stable strategy; Government subsidy; Supply chain management; Vaccines.