Impact of privatization on social welfare in the service supply chain

Emerging economies have developed different service supply chain configurations due to government divestment. Despite high demand for public services, governments typically lack capital to invest. Consequently, public services quality can decline, thereby affecting social welfare overall. Therefore, public firms partner with private firms to offer public services. Additionally, the private sector offers services to the public and maximizes profits. Therefore, any private sector involvement in public services should be carefully evaluated. Hence, it is important to understand how public and private entities have different objectives that affect SW and CS in terms of social welfare. This study uses the healthcare sector as a motivational example and develops and solves three models that consider different decisions: (1) All public firms provide services; (2) All private firms provide services; and (3) Public and private partners provide services. Additionally, social welfare maximization has been considered in a competitive environment. The results show that consumer surplus and welfare are higher when public firms only offer services. Private-public partnerships result in lower SW and CS. The CS and SW are higher under competition and lower without. Furthermore, another interesting result is that profit, CS, and SW are the same for Model AB and Model BA. Finally, we guide managers on privatizing service supply chains.