Economics Research Institute Study Paper
Utah State University Department of Economics
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I consider the design of first best rural wage contracts for many tenants by an absentee landlord who delegates part of the contracting decision to his hired agent in each village. I analyze contracting in two scenarios. The first scenario is a two tiered hierarchy with no agent/tenant collusion and the second scenario is a three tiered hierarchy with agent/tenant collusion. I show that irrespective of whether the contracting is two or three tiered, when the productivities of tenants and the private information of agents across villages is perfectly correlated, the absentee landlord can always implement the first best wage contract in a Bayesian-Nash equilibrium.
Batabyal, Amitrajeet A., "On the Design of First Best Rural Wage Contracts in Perfectly Correlated Agrarian Environments" (1998). Economic Research Institute Study Papers. Paper 140.