Inefficient Market

Slonim et al (JEP, 2014) The Market for Blood

This paper investigates the market for blood in the world. It finds that GDP is positively correlated with blood donation, 75% higher-income countries depend on 100% volunteers for whole blood needs, and 46% lower-income countries depend on other systems for half of their supply, using 2014 data from WHO. Specifically, the United States relies almost entirely on voluntary donations for whole blood, but the U.S. plasma market has long been dominated by commercial operations. These have made the United States the world’s major supplier of plasma products, meeting the needs of countries that depend on voluntary plasma donations.

The authors claims that the market for blood is inefficient due to lack of price system. Spikes in blood donation after such disasters result in excess supply, and (given blood’s limited shelf life) this often leads to the destruction of surplus supply. Seasonal supply shortages of blood during winter and around holidays are more common. They establishes a donor registry design, which increased donation during short-ages and increased donor welfare.