MIT Department of Economics
77 Massachusetts Ave
Cambridge, MA 02139
Institutional Affiliation: Massachusetts Institute of Technology
NBER Working Papers and Publications
|June 2018||Market Failure in Kidney Exchange|
with Nikhil Agarwal, Itai Ashlagi, Eduardo Azevedo, Clayton R. Featherstone: 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.