Abstract: Based on the present group procurement regulation for medicines, a bilateral bargaining game between two competing pharmaceutical enterprises and one government-oriented procurement platform is proposed to investigate pharmaceutical enterprises' pricing strategies, profit allocation mechanisms between two enterprises and one procurement platform, and key factors influencing pharmaceutical enterprises' willingness to participate in group procurement. The impacts of group procurement regulation on pharmaceutical enterprises' pricing strategies, profits, providers' procurement costs as well as the allocation efficiency of the medicine market are also discussed. The main results are as follows: First, group procurement regulation for medicines will lower prices and the whole procurement costs for medical providers but does not necessarily improve the social welfare. Second, firm's willingness of participation in group procurement increases with its own group procurement efficiency and its rival's bargaining power, and decreases with its rival's group procurement efficiency and its own bargaining power; Third, a firm higher bargaining power does not necessarily gain higher profit. The final profits of firms depend on the combined factors including enterprise's bargaining power, group procurement efficiency, and its rival's bargaining power and group procurement efficiency. Last, group procurement regulation for medicines does not necessarily lead to lower profits for both pharmaceutical enterprises. On some conditions, two enterprises can achieve "Win-Win" under group procurement regulation. In a word, our results provide practical significances for enhancing pharmaceutical firms' willingness to participate in group procurement, promoting the coordination between pharmaceutical firms and the group procure organization, giving full paly to the advantage of group procurement, and improving the allocation efficiency of the medicine market.

Key words: group procurement regulation, bargaining power, willingness to participate, bilateral bargaining game