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

by Christopher Balding

ARTICLE | Journal of Public Economic Theory | Vol.12,2010

Abstract

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 that 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 that does not flow to potential consumersthose 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. There are two key findings. First, I find that the producer decision to supply the good depends primarily on exogenous preference formation and not on consumerprovided 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 blueprint.