A Game Theoretical Model of Land Contract Choice
AbstractIn most of the land tenancy literature the type of contract is exogenous. Also even though these contracts vary a lot among farms, between regions and over time, the theoretical literature has not always acknowledged this idiosyncrasy. Building on the strategic bargaining theory initiated by Rubinstein, this model not only makes the type of contract endogenous, but also provides the surplus sharing rules and the conditions giving rise to each type of contract, showing how the type and terms of the contract are tailored to fit the characteristics of the parties and their economic environment. Pairwise bargaining is embedded into a market context by putting “competitive pressure” on the players through the opportunity they have to break up bargaining and look for alternative partners. Because of this threat of opting out, the outcome of the bargaining process depends not only on the characteristics of the players, but also on events outside their match and the information they have about them. The model departs from price-taking assumptions. Type and terms of the contract result from negotiation and are shaped by the “relative bargaining powers” of the players whose relevant components are identified in a precise way in the model.
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Bibliographic InfoPaper provided by Faculdade de Economia e Gestão, Universidade Católica Portuguesa (Porto) in its series Working Papers de Economia (Economics Working Papers) with number 01.
Length: 11 pages
Date of creation: Apr 2007
Date of revision:
land tenancy; sharecropping; land contract choice; game theory;
Other versions of this item:
- C7 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory
- D8 - Microeconomics - - Information, Knowledge, and Uncertainty
This paper has been announced in the following NEP Reports:
- NEP-AGR-2007-05-19 (Agricultural Economics)
- NEP-ALL-2007-05-19 (All new papers)
- NEP-GTH-2007-05-19 (Game Theory)
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