The pandemic has caused severe disruptions and significant losses in various industries. In particular, the nursing service industry has been greatly affected, leading to increased service costs and attrition of nursing service provider (NSP) residents. Although prior studies suggest that outsourcing may mitigate losses from disruptions, there still lacks a detailed analysis of whether and when to adopt such a disruption solution.
This study develops a two-period game-theoretical model to explore the impacts of demand and cost disruptions caused by the pandemic on NSPs’ operational strategies, suppliers’ strategy choices and equilibrium prices and demand.
The results present several novel managerial insights. First, we suggest that higher demand and cost disruptions decrease service demand, but do not necessarily prompt an NSP to outsource nursing services. Interestingly, we find that even when the service cost of the outsourcing strategy is low, the NSP may still insist on the in-house strategy. Additionally, the equilibrium strategy does not always result in lower prices and higher demand.
Our findings provide insightful takeaways for NSPs to cope with the pandemic in the nursing service industry. The results also offer theoretical support for other industries to recover from demand and cost disruptions.
