Optimal organization of surrogacy contracts and underinvestment

Pramanick, Amrita and Banerjee, Swapnendu (2014): Optimal organization of surrogacy contracts and underinvestment.

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.

• Item Type: MPRA Paper
• Language: English
• Keywords: Surrogate, intended-parents, surrogacy agency, monitoring, moral hazard
• Subjects: D - Microeconomics > D1 - Household Behavior and Family Economics > D10 - General

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