Truthful Mechanisms for Medical Surplus Product Allocation

We analyze a resource allocation problem faced by Medical Surplus Recovery Organizations (MSROs) that recover medical surplus products to fulfill the needs of under-served healthcare facilities in developing countries. Due to the uncertain, uncontrollable supply and limited information about recipient needs, delivering the right product to the right recipient in MSRO supply chains is particularly challenging. The objective of this study is to identify strategies to improve MSROs’ value provision capability. In particular, we propose a mechanism design approach, and determine which recipient to serve at each shipping opportunity based on recipients’ reported preference rankings of different products. We find that when MSRO inventory information is shared with recipients, the only truthful mechanism is random selection among recipients, which defeats the purpose of eliciting information. Consequently, we propose two operational strategies to improve MSROs’ value provision: i) not sharing MSRO inventory information with recipients; and ii) withholding information regarding other recipients. We characterize the set of truthful mechanisms under each setting, and show that eliminating inventory and competitor information provision both improve MSROs’ value provision. Further, we investigate the value of cardinal mechanisms where recipients report their valuations. We show that in our setting, eliciting valuations has no value added beyond eliciting rankings under a wide class of implementable mechanisms. Finally, we present a calibrated numerical study based on historical data from a partner MSRO, and show that a strategy consisting of a ranking-based mechanism in conjunction with eliminating inventory and competitor information can significantly improve MSROs’ value provision.