Tingting Yan accepted for publication in International Journal of Production Research
Mike Ilitch School of Business Professor of Global Supply Chain Management Tingting Yan has been accepted for publication in the International Journal of Production Research, which publishes research on manufacturing and production engineering, logistics, production economics and production strategy.
The article, “How to Change Doctors and Price Medicines in a Two-sided Online Healthcare Platform with Network Externalities?” was co-authored by Xueyuan Cai (Wuhan Textile University), Fangying Hu (Hauzhong University of Science and Technology), Jianbin Li (Hauzhong University of Science and Technology) and Xiangrong Song (Hauzhong University of Science and Technology).
Platform business models are upending the value proposition of the companies in traditional industries, such as healthcare, through competitively pricing value-added services and products. In this study, we consider a unique, but important, on-demand two-sided service platform: a monopolistic online healthcare platform, which not only provides medical services to patients by connecting them with doctors, but also sells medical products to patients. A crucial operational decision for the platform is to set up a pricing scheme to encourage enough doctors and patients to participate on the platform. We consider two common pricing schemes in this study: fixed and linear pricing, in an empirically-grounded optimization model that considers medicine pricing decisions together with network externalities. Our results show that the fixed pricing scheme almost always dominates the linear pricing scheme by providing the platform with higher expected profit. Our results also reveal the strong interdependence between the optimal doctor service pricing decision and optimal medicine pricing decision. However, these decisions are often made independently by different functional units of a firm, which could cause suboptimal platform financial performance. These results indicate the importance of pricing products and services in an integrated manner for maximizing the profit of a product/service platform.