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Market Failure in Kidney Exchange

Nikhil Agarwal, Itai Ashlagi, Eduardo Azevedo, Clayton R. Featherstone and Ömer Karaduman

No 24775, NBER Working Papers from National Bureau of Economic Research, Inc

Abstract: We show that kidney exchange markets suffer from traditional market failures that can be fixed to increase transplants by 25%-55%. 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 do not internalize their patients’ benefits from exchange, and current mechanisms sub-optimally reward hospitals for submitting patients and donors. Third, we estimate a production function and show that individual hospitals operate below efficient scale. Eliminating this inefficiency requires a combined approach using new mechanisms and solving agency problems.

JEL-codes: D42 D47 L11 (search for similar items in EconPapers)
New Economics Papers: this item is included in nep-des
Date: 2018-06
Note: AG HC HE IO
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