Robert G. Edwards has just won the Nobel Prize in medicine for his work on in vitro fertilization. So I searched for "economics in vitro" and found a recent paper on pricing IVF, by Anthony Dukes and Rajeev Tyagi:
This paper examines the economics of pricing practices at artificial reproductive clinics, which have introduced money-back guarantees (MBGs) for in vitro fertilization. We identify incentives for clinics to offer MBGs and evaluate the impact on couples' choices and on social welfare. Introducing MBGs allows a clinic to (i) segment couples simultaneously on their relative fertility and on risk preferences; (ii) offer quantity discounts to relatively infertile couples; and (iii) offer some risk-sharing to couples for this costly procedure, whose outcome is uncertain. Our results also show how the addition of MBGs can affect the overall social welfare.
In other words, price discrimination. (As it is applied, IVF succeeds one time out of five.) Low-fertility couples are made better off by the implied discount, some high-fertility couples may be worse off from the higher prices they face, and overall social welfare goes up from the money back guarantee, which also may signal provider quality.
Here is a recent critique, claiming that the money-back guarantee damages the nature of parenthood. Yet it is believed that four million people have been born, thanks to IVF.
Any word on the social cost of orphans left unadopted due to couples using in vitro instead of adoption? Maybe these people weren’t going to be adopters anyway.
A doctor in our area, a friend of a friend of mine, was one of the first doctors in the country to have a money back IVF guarantee program. Since I teach a graduate pricing program from time to time, I was interested in the economics of this and had some long conversations on his practice. He told me he avoided adverse selection by having differential rates based on whether this was a first time couple, or whether the couple had previously done IVF techniques with another practioner. He also understood his marginal costs quite well and that couples wouldn’t continue if it were futile as there are some unpleasant and time consuming aspects to some of the procedures. He also later excluded drug costs from the program, putting basically his time and that of the clinic at risk.
About five to eight years ago he was thinking of opening a branch in China but never did it.
This doc is an entrepeneur.
I expect him someday to sell fertility insurance to newlyweds as a wedding present.
As an insurance program, the money-back program is idiotic. Children are extremely expensive. Therefore, parents should prefer higher prices for failed IV attempts. In fact, clinics should offer an insurance program against having triplets.
This article examines the economics of price competition on artificial reproduction clinics that have introduced money-back guarantees for IVF. They identify incentives for the clinics can offer MBGs and assess the impact on the couple’s choice and welfare.
body shops
The issue is the well-being of the resulting kids. If kids produced by IVF or any other biotechnology are treated just as well by their parents as those produced naturally, then there is no “bio-ethical” issue at all. In all of the hand-wringing over this stuff, I have see no evidence presented that shows that kids produced artificially are treated any worse than those produced naturally. In fact, there is reason to believe the opposite is likely to be the case.
People who use artificial means to have kids are putting forth time, money, and effort to have a child. Such people are likely to have greater future-time orientation, intelligence, and executive function (all traits that positively correlate with being good parents) than those who have kids by “accident” in the back of a car or after the dance club. Since having kids by artificial means, by definition, involves more forethought and planning, such parent will no doubt invest more in their children’s upbringing than most others and their kids are likely to turn out better and to have more opportunities as adults.
The “bio-ethics” people are clearly missing the boat on this issue.
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