Redesigning Markets for Blood Donations

Volunteer supply is widespread, yet without a price, inefficiencies occur due to suppliers’ inability to coordinate with each other and with demand. In blood donation, due to the inability to pay people for whole blood, volunteer suppliers cannot efficiently respond to seasonal changes or shocks in blood demand. Because whole blood is perishable with around 6 weeks’ shelf-life, many blood banks around the world frequently suffer from temporary shortages even with enough suppliers to meet demand, and occasionally from excess supply during disasters like terrorist attacks, hurricanes and earthquakes. We propose a market clearinghouse mechanism that improves efficiency if goods or services were altruistically supplied without a price. The mechanism, a registry, combines aggregate demand information with supplier’s willingness to help, and invites volunteers to help according to the need for their help.

We resort a lab study and a field experiment to help in the design of this registry. Our lab study compares aggregate market outcomes for altruistic helping behavior under various market designs. We examine the baseline set-up, baseline with public information on aggregate demand, and three variations of our proposed mechanisms in the form of a registry. The public information treatment reflects running information campaigns on blood shortages. We find that all three variations of registries dramatically improve market outcomes, in which voluntary supply equals demand in significantly more periods than that in the baseline. However, providing demand information generates similar patterns of oversupply and undersupply as in the baseline. We further find that suppliers were more willing to help, ceteris paribus, in the registry treatments than in the baseline and public demand information treatments.

In our field study we present evidence from a field experiment with the Australian Red Cross Blood Service. We demonstrate that our proposed registry design improves donor response dramatically during both mild and critical blood shortages. The effect size of improvement in supply justifies the potential costs of implementing the registry in blood donation context.