Dynamic Kidney Exchange

Abstract

We study how barter exchanges should be conducted through a centralized mechanism in a dynamically evolving agent pool with time- and compatibility-based preferences. We find the dynamically optimal two-way and multi-way exchange mechanisms that maximize total discounted exchange surplus. Recently several live-donor kidney exchange programs were established to swap incompatible donors of end-stage kidney disease patients. Since kidney exchange is a special instance of our more general model, dynamically optimal kidney exchange mechanisms are characterized as corollaries. We make policy recommendations using simulations.

Keywords: Dynamic exchange, barter exchange, kidney exchange, matching, market design, dynamic optimization, Markov process

JEL Classification: C78, C70, D78, C61