Market Failure in Kidney Exchange
Clayton R. Featherstone
- American Economic Review (Forthcoming)
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.
Forthcoming Article Downloads