Jumping the Line Charitably: Analysis and Remedy of Donor-Priority Rule

Abstract

The ongoing shortage of organs for transplantation has generated an expanding literature on efficient and equitable allocation of the donated cadaveric organs. By contrast, organ donation has been little explored. In this paper, we develop a parsimonious model of organ donation to analyze the social-welfare consequences
of introducing the donor-priority rule, which grants registered organ donors priority in receiving organs, should they need transplants in the future. We model an individual’s decision to join the donor registry, which entails a tradeoff between abundance of supply, exclusivity of priority, and cost of donating (e.g.,
psychological burden). Assuming heterogeneity in the cost of donating only, we find the introduction of the donor-priority rule leads to improved social welfare. By incorporating heterogeneity in the probability of requiring an organ transplant and in organ quality, we show that, in contrast to the literature, introducing the
donor-priority rule can lower social welfare due to unbalanced incentives across different types of individuals. In view of the potentially undesirable social-welfare consequences, we propose a freeze-period remedy, under which an individual is not entitled to a higher queueing priority until after having been on the organ-donor registry for a specified period of time. We show that, echoing the theory of the second best (Lipsey and Lancaster 1956), this additional market friction helps rebalance the incentive structure, and in conjunction with the donor-priority rule, can guarantee an increase in social welfare by boosting organ supply without compromising organ quality or inducing excessively high costs of donating.