Strategic Lengths of Tenancy Contracts
In a multi-period environment, time is certainly an added dimension in which the principal can differentiate in search of better screening contracts. This idea is used in a two-period model of agriculture without any form of uncertainty, where the landlord offers separating tenurial contracts to screen tenants of different skills, when the skill is private information. The paper shows that a risk neutral landlord wishing to hire a risk averse tenant will always find it optimal to offer a long term fixed rent contract to a high-skilled tenant and a short term sharecropping contract to a low-skilled one.
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