Nicola Lacetera, University of Toronto
Nicola Lacetera, University of Toronto
Morality-Efficiency Trade-offs in Repugnant Markets
Morality-Efficiency Trade-offs in Repugnant Markets
01 Dec 201512:00 PM – 1:30 PM
Faculty and doctoral students only
Location:
Baker Library | Bloomberg Center 103
Organizer:
Morality-Efficiency Trade-offs in Repugnant Markets
Julio Elias (Universidad del CEMA), Nicola Lacetera (University of Toronto), Mario Macis (Johns Hopkins University)
The use of price-mediated markets is often rejected on moral grounds for certain transactions. Examples include the procurement of human organs and body fluids for transplantation and transfusion, prostitution, surrogacy, the intellectual property protection over certain discoveries (e.g. concerning living organisms), the use of surge pricing, and the production and consumption of certain types of food. Attitudes toward these activities vary across countries and time.
Moral considerations thus affect public policies as well as business strategies, such as decisions on which industries to enter, how to organize production internationally, pricing and business models, and so on. However, there is very little empirical evidence on how these concerns affect preferences, and how they interact with other relevant features such as the efficiency of a transaction.
We study the impact of moral concerns on individual preferences for different ways to organize a morally charged transaction, the procurement of organs for transplantation. We ask whether and how individuals trade off their moral concerns for different levels of efficiency of different organizations of organ procurement and allocation – a system with unpaid donors, one where donors are paid by the organ recipients, and a system where donors are paid through a government agency and organs are allocated based on priority rules.
In an experimental survey with 1,380 U.S. residents, we asked participants to choose between two procurement and allocation systems, randomly varying the pair of systems and their efficiency (i.e. the share of patients on the waiting list that would receive a transplant).
We found that stated moral concerns affected preferences for a system. Structural estimates of the marginal rate of substitution between moral repugnance and efficiency showed that, on average, individuals were willing to accept a system that they consider more repugnant when it is sufficiently more efficient. The morality-efficiency trade-off varied widely among respondents, but was not related to their socio-demographic characteristics. This is consistent with moral concerns toward a transaction being a deep individual belief, although efficiency also affected morally charged choices.
Finally, repugnance was not due to payments for organs per se, but to recipient rather than a third party performing the payment. An implication of this finding is that, for the most part, moral concerns toward payments for organs can be allayed by proper market design.