Journal
AMERICAN ECONOMIC REVIEW
Volume 109, Issue 11, Pages 4026-4070Publisher
AMER ECONOMIC ASSOC
DOI: 10.1257/aer.20180771
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Funding
- Alfred P. Sloan Foundation [FG2018-10387]
- Wharton's Dean's Research Fund
- National Science Foundation [SES-1729090, SES-1254768]
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We show that kidney exchange markets suffer from market failures whose remedy could increase transplants by 30 to 63 percent. 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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