An option contract for vaccine procurement using the SIR epidemic model

Timely and adequate supply of vaccines in disastrous situations has a key role in controlling communicable diseases. This paper develops a specific option contract for proactively provisioning required vaccine doses from two suppliers (a main and a backup). The model aims to minimize the procurement and social costs using the SIR epidemic model. A novel hybrid solution procedure is developed using the optimal control theory, Stackelberg game model and nonlinear programming approaches. To evaluate the performance of the developed solution method, a number of numerical examples are presented and their results are discussed.