Making a market for Miscanthus: Can new contract designs solve the biofuel investment hold-up problem?

Steven Y. Wu, Stephanie Rosch, Corinne Alexander, Wallace Tyner and Joshua Yoder

No 61743, 2010 Annual Meeting, July 25-27, 2010, Denver, Colorado from Agricultural and Applied Economics Association

Abstract: We present designs for optimal contracts to solve the investment hold-up problem for perennial crops for the biofuel industry. A fixed-price contract is ex-ante efficient but renegotiation-proof for a limited range of discount parameters. A perfectly- indexed contract is both renegotiation-proof and ex-post efficient. Provided long-run land prices are stationary, the expected cost for both contracts converges to the long-run expected price of land for a risk-neutral farmer.

Keywords: Marketing (search for similar items in EconPapers)
Pages: 2
Date: 2010
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Persistent link: https://EconPapers.repec.org/RePEc:ags:aaea10:61743

DOI: 10.22004/ag.econ.61743

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