Addressing the shortage of kidneys for transplantation: purchase and allocation through chain auctions.

Transplantation is generally the treatment of choice for those suffering from kidney failure. Not only does transplantation offer improved quality of life and increased longevity relative to dialysis, it also reduces end-stage renal disease program expenditures, providing savings to Medicare. Unfortunately, the waiting list for kidney transplants is long, growing, and unlikely to be substantially reduced by increases in the recovery of cadaveric kidneys. Another approach is to obtain more kidneys through payment to living "donors," or vendors. Such direct commodification, in which a price is placed on kidneys, has generally been opposed by medical ethicists. Much of the ethical debate, however, has been in terms of commodification through market exchange. Recognizing that there are different ethical concerns associated with the purchase of kidneys and their allocation, it is possible to design a variety of institutional arrangements for the commodification of kidneys that pose different sets of ethical concerns. We specify three such alternatives in detail sufficient to allow an assessment of their likely consequences and we compare these alternatives to current policy in terms of the desirable goals of promoting human dignity, equity, efficiency, and fiscal advantage. This policy analysis leads us to recommend that kidneys be purchased at administered prices by a nonprofit organization and allocated to the transplant centers that can organize the longest chains of transplants involving willing-but-incompatible donor-patient dyads.

Cost-benefit analysis involving addictive goods: contingent valuation to estimate willingness-to-pay for smoking cessation.

The valuation of changes in consumption of addictive goods resulting from policy interventions presents a challenge for cost-benefit analysts. Consumer surplus losses from reduced consumption of addictive goods that are measured relative to market demand schedules overestimate the social cost of cessation interventions. This article seeks to show that consumer surplus losses measured using a non-addicted demand schedule provide a better assessment of social cost. Specifically, (1) it develops an addiction model that permits an estimate of the smoker's compensating variation for the elimination of addiction; (2) it employs a contingent valuation survey of current smokers to estimate their willingness-to-pay (WTP) for a treatment that would eliminate addiction; (3) it uses the estimate of WTP from the survey to calculate the fraction of consumer surplus that should be viewed as consumer value; and (4) it provides an estimate of this fraction. The exercise suggests that, as a tentative first and rough rule-of-thumb, only about 75% of the loss of the conventionally measured consumer surplus should be counted as social cost for policies that reduce the consumption of cigarettes. Additional research to estimate this important rule-of-thumb is desirable to address the various caveats relevant to this study.