Optimal share contracts under theft
AbstractTemptation for tenants to under-report output levels under share contracts is undoubtedly high. There is evidence that theft of product occurs and that this affects the design of share contracts. In this case, the optimal output share is chosen to not only induce effort but also to reduce theft of product, while meeting the landlordÃ¢â¬â¢s limited liability obligation. The tenantÃ¢â¬â¢s share thus rises with his desire and ability to steal. The optimal contract allows both residual inefficiency in the provision of effort and residual cheating. This contract is also modified by process utility in cheating, ability of the landlord to supervise, risk of revenge with abusive surveillance, and switch to products less prone to theft.
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Bibliographic InfoPaper provided by University of California at Berkeley, Department of Agricultural and Resource Economics and Policy in its series CUDARE Working Paper Series with number 0980.
Length: 18 pages
Date of creation: 2004
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Other versions of this item:
- de Janvry, Alain & Sadoulet, Elisabeth, 2004. "Optimal Share Contracts under Theft," Department of Agricultural & Resource Economics, UC Berkeley, Working Paper Series qt6kq6t3bb, Department of Agricultural & Resource Economics, UC Berkeley.
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
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