Economics is often associated with money. But some of its most interesting problems begin when money cannot be used at all.



Imagine two patients who each need a kidney. Both have a friend or relative willing to donate, but neither donor is medically compatible with the person they want to help. On their own, both have hit a dead end. But if Donor A were compatible with Patient B, while Donor B were compatible with Patient A, the two donors could effectively swap recipients, allowing both transplants to take place.



This is kidney paired donation, and it is also a market-design problem.



In the United States, buying and selling organs for transplantation has been illegal since 1984. That means the usual economic solution to scarcity, allowing prices to balance supply and demand, cannot simply be applied here. Allowing kidneys to be bought and sold could increase supply, but it could also mean that access depends more heavily on income while poorer people face greater pressure to become donors.



Economists therefore approach the problem differently. Instead of asking, “What should the price be?”, they ask, “How should the market be designed?”



This is where matching theory can help. Rather than examining one donor-recipient pair at a time, computer systems can search across a much larger pool of incompatible pairs. This is especially useful because, though some matches may involve a simple two-way swap, some can also become a chain. For example, a donor with no intended recipient can donate to one patient, whose original donor then gives to another, and so on, meaning that initial donation can unlock several transplants.



Economist Alvin Roth, who shared the 2012 Nobel Prize in Economic Sciences for work on matching and market design, helped put these ideas into practice by developing ways to search across large pools of incompatible donor-recipient pairs and identify possible swaps and chains.



That said, kidney exchange cannot solve the bigger problem: there are still not enough kidneys for everyone who needs one. Better matching doesn’t create any more kidneys, after all. This raises another economic question over whether financial incentives for donation should ever be allowed.



Paying donors could encourage more people to donate and increase the supply of kidneys, but it could also place disproportionate pressure on people with lower incomes to take on the risks of donation.



The trade-off, then, is between increasing supply and protecting donors from a system in which financial need could influence the decision to donate.



Even without resolving that debate, though, kidney exchange shows how better market design can make more effective use of the resources already available.



Works Cited

Health Resources and Services Administration. “Kidney Paired Donation for Patients.” Health Resources and Services Administration, U.S. Department of Health and Human Services, https://www.hrsa.gov/optn/patients/kidney-paired-donation-for-patients. 

Health Resources and Services Administration. “Organ Donation.” Health Resources and Services Administration, U.S. Department of Health and Human Services, https://www.hrsa.gov/optn/patients/organ-donation. 

Health Resources and Services Administration. “Recommendations 19–28.” Advisory Committee on Organ Transplantation, U.S. Department of Health and Human Services, https://www.hrsa.gov/advisory-committees/organ-transplantation/recommendations/19-28. 

Institute of Medicine. Organ Donation: Opportunities for Action. Edited by James F. Childress and Catharyn T. Liverman, National Academies Press, 2006, https://www.nationalacademies.org/read/11643.

Roth, Alvin E. “The Theory and Practice of Market Design.” Nobel Prize Lecture, 8 Dec. 2012, Nobel Prize, https://www.nobelprize.org/uploads/2018/06/roth-lecture.pdf.

Roth, Alvin E. “Al Roth’s Game Theory, Experimental Economics, and Market Design Page.” Stanford University, https://web.stanford.edu/~alroth/alroth.html.