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Ready for the next wave?

Leading economists recommend a new distribution system for vital medical goods in a nature-commentary.

The coronavirus has sent the demand for protective equipment, medicines and other vital medical supplies skyrocketing to undreamt-of heights. Worldwide, there has been some fierce wrangling over scarce resources. Many governments tried to procure as many life-saving resources as possible. In the case of the COVID19 pandemic, however, it means that people will die if the demand cannot be met. Therefore, the question is urgently posed as to which procedures should be used to distribute resources - and in future medicines and vaccines.

The two WiSo.professors Axel Ockenfels and Peter Cramton (Key Resarch Initiative Design & Behavior), economists at the Centre for Social and Economic Behaviour at the University of Cologne (C-SEB) and in the ECONtribute Cluster of Excellence, together with Nobel Prize winner Alvin Roth and Robert B. Wilson (Stanford University), propose a new distribution system for medical goods in the current issue of the journal Nature.

In doing so, they draw parallels with markets that explicitly provide for rules for emergency situations (such as electricity markets) and with markets where selling to the highest bidder is not acceptable (such as the distribution of food donations at tables).

The authors, all leading experts in the research field of market design, recommend the establishment of a central clearing house responsible for allocation. Modern algorithms could help to estimate the needs of hospitals and optimize allocation over time and space.

By introducing a special currency for essential goods, prices could take on their important steering role, without the goods simply being sent to the richest institutions. The special currency also helps to motivate hospitals to offer their own reserves and to coordinate themselves.

Governments should promote a market for medical supplies that could seamlessly switch to emergency mode in times of crisis.

The coronavirus will keep us busy for many months. There will be new waves and mutations. A successful vaccine will create new shortages. The authors show how we can be better prepared next time.