We present a model with a monopolistic landlord and tenants with unobservable ability. In this setting, the landlord should use a wage contract to extract the full surplus due to ability since a share or fixed rent contract leaves some of the surplus in the hands of the tenants. We combine this issue with a standard moral hazard problem on the tenants' side, which argues for a fixed rent contract. A share contract is an optimal compromise between these two forces.
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Paper provided by Schwartz Center for Economic Policy Analysis (SCEPA), The New School in its series SCEPA Working Papers with number
2001-03.
Find related papers by JEL classification: C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information O12 - Economic Development, Technological Change, and Growth - - Economic Development - - - Microeconomic Analyses of Economic Development Q15 - Agricultural and Natural Resource Economics; Environmental and Ecological Economics - - Agriculture - - - Land Ownership and Tenure; Land Reform; Land Use; Irrigation
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