Market Failure in Kidney Exchange
- (pp. 4026-70)
AbstractWe 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.
CitationAgarwal, 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.20180771
- D24 Production; Cost; Capital; Capital, Total Factor, and Multifactor Productivity; Capacity
- D47 Market Design
- I11 Analysis of Health Care Markets