Market Failure in Kidney Exchange / Nikhil Agarwal, Itai Ashlagi, Eduardo Azevedo, Clayton R. Featherstone, Ömer Karaduman.

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Agarwal, Nikhil

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Material type: Text

TextSeries: Working Paper Series (National Bureau of Economic Research) ; no. w24775.Publication details: Cambridge, Mass. National Bureau of Economic Research 2018.Description: 1 online resource: illustrations (black and white)Subject(s):

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Abstract: We show that kidney exchange markets suffer from market failures whose remedy could increase transplants by 30%-63%. 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.

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June 2018.

We show that kidney exchange markets suffer from market failures whose remedy could increase transplants by 30%-63%. 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.