Optimal share contracts under theft
Temptation 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 landlordâ€™s limited liability obligation. The tenantâ€™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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- Usher, D, 1987. "Theft as a Paradigm for Departures from Efficiency," Oxford Economic Papers, Oxford University Press, vol. 39(2), pages 235-52, June.
- Summers, Lawrence H. & Dickens, William T. & Katz, Lawrence F. & Lang, Kevin, 1989.
"Employee Crime and the Monitoring Puzzle,"
3645199, Harvard University Department of Economics.
- Salih, Siddig A, 1993. "An Analysis of Unreported Sales of Wheat in Sudan," Australian Economic Papers, Wiley Blackwell, vol. 32(60), pages 161-74, June.
- Basu, Kaushik, 1992. "Limited liability and the existence of share tenancy," Journal of Development Economics, Elsevier, vol. 38(1), pages 203-220, January.
- Naresh Sharma & Jean Dreze, 1996. "Sharecropping in a North Indian Village," Journal of Development Studies, Taylor & Francis Journals, vol. 33(1), pages 1-39.
- Eswaran, Mukesh & Kotwal, Ashok, 1985. "A Theory of Contractual Structure in Agriculture," American Economic Review, American Economic Association, vol. 75(3), pages 352-67, June.
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