Mechanism design for sharing critical medical resources in pandemic

Abstract

Maintaining a sufficient national stockpile of critical medical resources and optimizing their strategic allocation across regions are essential for managing public health crises in any country during pandemics. Challenges arise from the unsustainability of stockpiles of critical medical resources and the deep uncertainty surrounding pandemics. This paper redesigns the inventory logic of critical medical resources by proposing a resource-sharing incentive mechanism to alleviate long-term supply chain pressures. Following the concept of risk pooling through inventory sharing, the mechanism encourages local governments to contribute their excess stockpiles to a centralized repository, managed and reallocated by the federal government according to established guidelines. Using the ventilator shortage during COVID-19 as a case study, we develop a model that captures the stochastic nature of pandemic trends over time and design a game model between national and local governments. Assuming specific pandemic trends, we demonstrate that the proposed incentive mechanism makes sharing ventilators a dominant strategy, significantly reducing total medical resource deficits. Furthermore, we validate the mechanism’s efficiency through simulations of more complex pandemic scenarios. Both theoretical and numerical analyses emphasize the importance of maintaining a minimum national stockpile as a strategic reserve and underscore the necessity of robust supply chain management.