American Economic Review Vol. 109 No. 11 2019

Market Failure in Kidney Exchange

Nikhil Agarwal¹; Itai Ashlagi²; Eduardo M. Azevedo³; Clayton R. Featherstone⁴; Ömer Karaduman⁵

¹ Department of Economics, MIT, 77 Massachusetts Avenue, E52-406, Cambridge, MA 02139, and NBER (email: ) · ² Stanford University, Huang Engineering Center 262, 475 Via Ortega, Stanford, CA 94305 (email: ) · ³ Wharton, 1455 Steinberg Hall-Dietrich Hall, 3620 Locust Walk, Philadelphia, PA 19104 (email: ) · ⁴ Wharton, 1352 Steinberg Hall-Dietrich Hall, 3620 Locust Walk, Philadelphia, PA 19104 (email: ) · ⁵ Department of Economics, MIT, 77 Massachusetts Avenue, E52-300, Cambridge, MA 02139 (email: )

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.

DOI

10.1257/aer.20180771

Volume

109

Issue

11

Pages

4026-4070

Language

en

Sources

bibtex:phds-export.bib openalex crossref

Cite

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