Pharmaceutical Supply Chain in China: Pricing and Production Decisions with Price-Sensitive and Uncertain Demand

In this paper, we apply game theory to study the price competition between drugstores and hospitals in China’s pharmaceutical supply chain. Motivated by drug shortages disparity problems, build a simplified model with one supplier, hospital, drugstore which sellers sell kind of compete on price. The hospital receives discount from government when ordering both face price-sensitive uncertain demand. existence uniqueness Nash equilibrium are proved closed-form solutions found for linear demand cases. We characterize pricing decisions drugstore. analysis shows that high ex-factory price, sensitivity, small three factors contributing shortages. consider two special kinds obtain insights into problem.