The impact of tariff policies on vaccine supply chains: short-term and evolutionary game behaviors based on uncertain utility

Abstract

People can choose to be vaccinated to prevent diseases at their own expense. There are specific vaccines for many diseases. Meanwhile, for a particular disease, there might be multiple vaccines available to choose from. Based on that, we constructed a stylized vaccine supply chain (VSC) model for the market where domestic vaccines and imported vaccines co-exist. We explored the effect of government tariff policies on the game behaviors between a domestic vaccine manufacturer (DVM) and an imported vaccine manufacturer (IVM). This paper analyzes the short-term game and long-term evolutionary game behaviors of the VSC from both the entirely rational and boundedly rational perspectives. The analysis considers three tariff policies: no tariffs on imported vaccines, tariffs borne by the IVM, and tariffs borne by buyers. Results suggest that in the short-term game, buyers bearing tariffs on imported vaccines can enable the DVM to gain the most market share. The buyers willingness-to-pay is relatively low for imported vaccines, which makes the DVM more profitable. Imposing tariffs on imported vaccines can reduce the IVMs profit margin. However, the IVM still prefers to bear the tariffs itself. Lowering the cold chain transportation level and reducing the retail price of imported vaccines are both feasible solutions for the IVM to relieve the pressure from tariffs. It is also feasible for the IVM to increase the retail price of imported vaccines when the buyers willingness to pay for imported vaccines is high. In long-term evolutionary game, the DVM can gain more room for price adjustment if the IVM bears tariffs. The IVM can obtain greater cost tolerance if buyers bear tariffs. However, from governments prospective, tariffs borne by buyers is the optimal option, which makes the VSC stable and controllable.