The (Im)Possibility of Reverse Share Tenancy

摘要: Under the assumption that landlord is risk-neutral and tenant risk-averse, sharecropping second-best in it trades off risk sharing incentives. Many, however, have reported instances of reverse share tenancy, or which considerably poorer than tenant. This note shows tenancy impossible under canonical Stiglitzian model but becomes possible if only (i) both can be assumed risk-averse; (ii) there exist significant transactions costs making more desirable either a wage fixed rent contract.