Abstract: For “4+7” procurement, such three irrational behavior factors as the confidence level, reference point and loss aversion of medical institution are taken into account, and a supply chain model is established in accordance with the real “4+7” procurement scene. The reference point is used as a function of the confidence level of the institution, which can not only examine the impact of the confidence level of the medical institution on the ordering decision, but also the law of the optimal order quantity and profit of the institution when considering its reference point. The study finds that the optimal order quantity of the medical institution is not always a monotonous decrease function with respect to loss aversion when reference point changes with confidence level. There are confidence level thresholds β₁ and β₂ (β₁<β₂) for low-profit medicines and high-profit medicines respectively. When the confidence level of the institution is lower than the threshold, both its optimal order quantity and profit decrease with the increase of the loss aversion; otherwise its optimal order quantity increases with the increase of the loss aversion, and its profit increases first and then decreases. According to these findings, strategies of medical institutions and manufacturers are given in the “4+7” quantity-price-linked procurement scenario.

Key words: “4+7” quantity-price-linked procurement, confidence level, reference point, loss aversion, pharmaceutical supply chain