The Wharton School
University of Pennsylvania
3620 Locust Walk, Suite 1400
Philadelphia, PA 19104
Institutional Affiliation: University of Pennsylvania
NBER Working Papers and Publications
|June 2018||Market Failure in Kidney Exchange|
with Nikhil Agarwal, Itai Ashlagi, Eduardo Azevedo, Ömer Karaduman: w24775
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.
Published: Nikhil Agarwal & Itai Ashlagi & Eduardo Azevedo & Clayton R. Featherstone & Ömer Karaduman, 2019. "Market Failure in Kidney Exchange," American Economic Review, vol 109(11), pages 4026-4070.
|December 2008||Ex Ante Efficiency in School Choice Mechanisms: An Experimental Investigation|
with Muriel Niederle: w14618
Criteria for evaluating school choice mechanisms are first, whether truth-telling is sometimes punished and second, how efficient the match is. With common knowledge preferences, Deferred Acceptance (DA) dominates the Boston mechanism by the first criterion and is ambiguously ranked by the second. Our laboratory experiments confirm this. A new ex ante perspective, where preferences are private information, introduces new efficiency costs borne by strategy-proof mechanisms, like DA. In a symmetric environment, truth-telling can be an equilibrium under Boston, and Boston can first-order stochastically dominate DA in terms of efficiency, both in theory and in the laboratory.