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Rent a womb: Surrogate selection, investment incentives and contracting

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  • Banerjee, Swapnendu
  • Basu, Sanjay

Abstract

We develop a model of gestational surrogacy, in which a childless couple faces heterogeneous prospective surrogates. High-type surrogates add more value but also have higher outside options. Surrogates can make specific investments for the overall well-being (care) of the unborn child. We show that, under noncontractibility, surrogates invest less (take less care) than the first-best. Couples are also more likely to choose low-type surrogates, who need less compensation for foregoing cheaper outside options. Hence the popular practice of making surrogacy contracts unenforceable might put the unborn child at risk.

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Bibliographic Info

Article provided by Elsevier in its journal Journal of Economic Behavior & Organization.

Volume (Year): 69 (2009)
Issue (Month): 3 (March)
Pages: 260-273

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Handle: RePEc:eee:jeborg:v:69:y:2009:i:3:p:260-273

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Keywords: Surrogate Intended parents Noncontractibility Under-investment;

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References

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  1. Grossman, Sanford J & Hart, Oliver D, 1986. "The Costs and Benefits of Ownership: A Theory of Vertical and Lateral Integration," Journal of Political Economy, University of Chicago Press, vol. 94(4), pages 691-719, August.
  2. Mathias Dewatripont & Patrick Bolton, 2005. "Contract theory," ULB Institutional Repository 2013/9543, ULB -- Universite Libre de Bruxelles.
  3. Hart, Oliver D & Moore, John, 1988. "Incomplete Contracts and Renegotiation," Econometrica, Econometric Society, vol. 56(4), pages 755-85, July.
  4. Hart, Oliver & Moore, John, 1990. "Property Rights and the Nature of the Firm," Journal of Political Economy, University of Chicago Press, vol. 98(6), pages 1119-58, December.
  5. Andrabi, Tahir & Ghatak, Maitreesh & Khwaja, Asim Ijaz, 2006. "Subcontractors for tractors: Theory and evidence on flexible specialization, supplier selection, and contracting," Journal of Development Economics, Elsevier, vol. 79(2), pages 273-302, April.
  6. Jean Tirole, 1999. "Incomplete Contracts: Where Do We Stand?," Econometrica, Econometric Society, vol. 67(4), pages 741-782, July.
  7. Hart, Oliver, 1995. "Firms, Contracts, and Financial Structure," OUP Catalogue, Oxford University Press, number 9780198288817, October.
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Cited by:
  1. Pramanick, Amrita & Banerjee, Swapnendu, 2014. "Optimal organization of surrogacy contracts and underinvestment," MPRA Paper 56961, University Library of Munich, Germany.

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