A Modest Proposal for a Two Sided Market Clearing Institution Under Asymmetric Supply Constraints with Skewed Pricing: The Market for Adoption and Abortion in the United States
Peking University - HSBC School of Business; ESADE University Faculties - ESADEgeo
January 7, 2009
Abortion is arguably the most fundamentally divisive issue in American politics. Abortion and childbirth research has generally omitted theoretical considerations focusing instead on empirical analysis of policy and economic incentives for unwanted pregnancies. This paper presents a theoretical model matching the potential supply of terminated pregnancies with the total demand for children within certain modeling constraints. First, the demand and supply of pregnancies should be studied within the theoretical framework of a market with economic incentives. Second, a theoretical model for the demand for abortion must incorporate the total market for children, which implies the market for pregnancy, abortion, and adoption. Third, there exist in the overall market for procreative goods and services certain unique characteristics that need to be carefully considered. Producers and suppliers within the procreative goods and services market have radically different price and cost elasticity functions and unique production asymmetries which create a potential net benefit for buyer and seller alike.
The market for abortion and adoption, while seemingly related and similar, suffer from a fundamental disconnect, preventing a simple exchange of goods and services: abortion implies potential supply which does not flow to potential consumers, those seeking to adopt. Studying this market inefficiency will benefit from a two sided market analysis used in situations where an intermediary business must attract both producers and suppliers. The supply side of the procreative goods market faces poor incentives and production asymmetries and the demand side suffers from too many people chasing too little product. First, I find that the producer decision to supply the good depends primarily on exogenous preference formation and not on consumer provided incentives. Second, I find that the market would benefit from legal framework for a market clearing institution using the market for real estate as the blue print.
Number of Pages in PDF File: 28
Keywords: two sided markets, Coase Theorem, platform pricing, abortion, adoption
JEL Classification: D40, D60, D82, J13, J17
Date posted: January 8, 2009