Events

We study operational decision-making by profit-oriented service providers under two popular service-focused subsidy welfare programs—namely, vouchers and contracted slots. In voucher programs, beneficiaries can redeem vouchers at any participating private service provider. However, these providers are only required to serve voucher holders if they have remaining capacity after accommodating full-price-paying customers from the private market. Conversely, in contracted slot programs, governments partner only with high-quality providers who commit to reserving a fixed number of slots to serve beneficiaries. We provide an operational lens to evaluate these program types, addressing the ongoing policy discourse surrounding their efficacy. To this end, we explore how program design, provider characteristics, and market dynamics influence the availability and quality of essential services delivered by service providers. By comparing equilibrium outcomes under the two program types, we identify conditions under which the government might favor vouchers or contracted slots, considering total societal impact and the total expected profits of for-profit providers. Our results provide guidance for designing operations-focused policies aimed at improving societal outcomes while ensuring alignment with private service provider incentives.