Document Type

Article

Journal/Book Title/Conference

Economics Research Institute Study Paper

Volume

2

Publisher

Utah State University Department of Economics

Publication Date

1998

Rights

Copyright for this work is held by the author. Transmission or reproduction of materials protected by copyright beyond that allowed by fair use requires the written permission of the copyright owners. Works not in the public domain cannot be commercially exploited without permission of the copyright owner. Responsibility for any use rests exclusively with the user. For more information contact the Institutional Repository Librarian at digitalcommons@usu.edu.

First Page

1

Last Page

21

Abstract

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.

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