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Making a market for Miscanthus: Can new contract designs solve the biofuel investment hold-up problem?

Author

Listed:
  • Wu, Steven Y.
  • Rosch, Stephanie D.
  • Alexander, Corinne E.
  • Tyner, Wallace E.
  • Yoder, Joshua

Abstract

We present designs for optimal contracts to solve the investment hold-up problem for perennial crops for the biofuel industry. A fixed-price contract is ex-ante efficient but renegotiation-proof for a limited range of discount parameters. A perfectly- indexed contract is both renegotiation-proof and ex-post efficient. Provided long-run land prices are stationary, the expected cost for both contracts converges to the long-run expected price of land for a risk-neutral farmer.

Suggested Citation

  • Wu, Steven Y. & Rosch, Stephanie D. & Alexander, Corinne E. & Tyner, Wallace E. & Yoder, Joshua, 2010. "Making a market for Miscanthus: Can new contract designs solve the biofuel investment hold-up problem?," 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado 61743, Agricultural and Applied Economics Association.
  • Handle: RePEc:ags:aaea10:61743
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