Market Failure in Kidney Exchange
American Economic Review
vol. 109,
no. 11, November 2019
(pp. 4026-70)
Abstract
We show that kidney exchange markets suffer from market failures whose remedy could increase transplants by 30 to 63 percent. First, we document that the market is fragmented and inefficient; most transplants are arranged by hospitals instead of national platforms. Second, we propose a model to show two sources of inefficiency: hospitals only partly internalize their patients' benefits from exchange, and current platforms suboptimally reward hospitals for submitting patients and donors. Third, we calibrate a production function and show that individual hospitals operate below efficient scale. Eliminating this inefficiency requires either a mandate or a combination of new mechanisms and reimbursement reforms.Citation
Agarwal, Nikhil, Itai Ashlagi, Eduardo Azevedo, Clayton R. Featherstone, and Ömer Karaduman. 2019. "Market Failure in Kidney Exchange." American Economic Review, 109 (11): 4026-70. DOI: 10.1257/aer.20180771Additional Materials
JEL Classification
- D24 Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
- D47 Market Design
- I11 Analysis of Health Care Markets