Hospital stockpiling for disaster planning

In response to the increasing threat of terrorist attacks and natural disasters, governmental and private organizations worldwide have invested significant resources in disaster planning activities. This article addresses joint inventory stockpiling of medical supplies for groups of hospitals prior to a disaster. Specifically, the problem of determining the stockpile quantity of a medical item at several hospitals is considered. It is assumed that demand is uncertain and driven by the characteristics of a variety of disaster scenarios. Furthermore, it is assumed that hospitals have mutual aid agreements for inventory sharing in the event of a disaster. Each hospital's desire to minimize its stockpiling cost together with the potential to borrow from other stockpiles creates individual incentives well represented in a game-theoretic framework. This problem is modeled as a non-cooperative strategic game, the existence of a Nash equilibrium is proved, and the equilibrium solutions are analyzed. A centralized model of stockpile decision making where a central decision maker optimizes the entire system is also examined and the solutions obtained using this model are compared to those of the decentralized (game) model. The comparison provides some managerial insights and public health policy implications valuable for disaster planning.