The pricing of in vitro fertilization

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.


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