NATIONAL BUREAU OF ECONOMIC RESEARCH
NATIONAL BUREAU OF ECONOMIC RESEARCH
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Market Failure in Kidney Exchange

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

NBER Working Paper No. 24775
Issued in June 2018
NBER Program(s):Aging, Health Care, Health Economics, Industrial Organization

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.

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Document Object Identifier (DOI): 10.3386/w24775

 
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