Abstract:

In order to improve the issues that excessive reliance on government physical reserves can lead to high sunk costs when no emergencies occur or high emergency procurement costs due to insufficient supplies. Firstly, the option contract was introduced to construct a hybrid reserve decision-making model for emergency supplies, incorporating social donations into the decision-making framework. Secondly, the selection of optimal hybrid reserve mode and allocation of reserve amount under the option contract mechanism were studied to minimize expected costs of the government. Then, the optimal decision based on the Karush-Kuhn-Tucker (KKT) conditions and optimal strategies were proposed. The standard implicit functions were obtained for the optimal amount of government physical reserves, contracted enterprise physical reserves, and contracted enterprise production capacity reserves. Finally, taking material donations and financial donations as the key channels for emergency supply provision. A sensitivity analysis and numerical simulations of related parameters were conducted. The effects of option contract premiums, disposal costs of donated materials, and the amount of material and fund donations on optimal reserve strategies and expected costs of the government were explored. The results indicate that the government may flexibly choose whether to execute contracts for reducing expected costs and expanding reserve scale. The increase in procurement costs in the spot market for emergency supplies enhances the sensitivity of expected costs of the government to changes in demand. The government should actively guide social forces to participate in emergency rescue and flexibly adjust donation strategies according to the intensity of emergencies.

Key words: option contract, social donations, emergency supplies, hybrid reserve decision-making, material donations, financial donations