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Optimal organization of surrogacy contracts and underinvestment

Author

Listed:
  • Pramanick, Amrita
  • Banerjee, Swapnendu

Abstract

We develop a model of commercial gestational surrogacy in which a childless couple approaches a prospective surrogate, who is willing to gestate for the couple. The surrogate’s care is non-contractible. We show that if the surrogate doesn’t have any wealth, at the optimum, she is always found to put in sub-optimal effort. Put differently, the surrogate cannot be made a residual claimant and therefore eliciting first best care is never optimal. Therefore the paper, in a hidden action framework, formalizes this ‘inefficiency’ inherent in the Indian ‘rent-a-womb’ market.

Suggested Citation

  • Pramanick, Amrita & Banerjee, Swapnendu, 2014. "Optimal organization of surrogacy contracts and underinvestment," MPRA Paper 56961, University Library of Munich, Germany.
    • Handle: RePEc:pra:mprapa:56961
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    References listed on IDEAS

    as
    1. Gillian Hewitson, 1997. "The Market for Surrogate Motherhood Contracts," The Economic Record, The Economic Society of Australia, vol. 73(222), pages 212-224, September.
    2. repec:bla:ecorec:v:73:y:1997:i:222:p:212-24 is not listed on IDEAS
    3. Swapnendu Banerjee, 2013. "Gestational Surrogacy Contracts: Altruistic Or Commercial? A Contract Theoretic Approach," Manchester School, University of Manchester, vol. 81(3), pages 438-460, June.
    4. Banerjee, Swapnendu & Basu, Sanjay, 2009. "Rent a womb: Surrogate selection, investment incentives and contracting," Journal of Economic Behavior & Organization, Elsevier, vol. 69(3), pages 260-273, March.
    5. Abhijit V. Banerjee & Paul J. Gertler & Maitreesh Ghatak, 2002. "Empowerment and Efficiency: Tenancy Reform in West Bengal," Journal of Political Economy, University of Chicago Press, vol. 110(2), pages 239-280, April.
    Full references (including those not matched with items on IDEAS)

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    JEL classification:

    • D10 - Microeconomics - - Household Behavior - - - General

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