Exploring Market Segment Assignment Strategies To Monopsonistic Entities in A Hypothetically Coordinated Vaccine Market

Abstract

This study presents a simulation-optimization approach for implementing the first stage of a four-stage optimization framework used to simulate a hypothetically coordinated vaccine market. The study's overall goal is to optimally make procurement decisions that result in more affordable vaccines for the buyers and profitable for their producers. In the initial stage, groups of market segments are assigned to coordinating entities that will make optimal procurement decisions under tiered pricing and pool procurement mechanisms. We explore nine different market-to-entity assignment policies through variants of a min-max optimization problem that mimics assignment policies with varying levels of cooperation among market segments. Our results show that market segments with low purchasing power can maximize their savings if they procure together with market segments with higher purchasing power. Additionally, market assignments that result in coordinating entities serving similar size populations mitigate the profit reduction of transferring savings to low-income market segments.