Equilibrium Limited Liability Contracts in a Landlord-Tenant Market

Kaniska Dam and David Pérez-Castrillo
Authors registered in the RePEc Author Service: David Perez-Castrillo

No 99, Working Papers from Barcelona School of Economics

Abstract: We propose a model based on competitive markets in order to analyse an economy with several homogeneous landlords and heterogeneous tenants. We model the landlord- tenant economy as a two-sided matching game and characterise the equilibrium of this market. In equilibrium, contracts are Pareto optimal, and the incremental surplus generated in a landlord-tenant relationship accrues to the tenant. We also suggest policy measures in relation to efficiency and income distribution.

Keywords: moral hazard; limited liability; endogenous matching; optimal contracts (search for similar items in EconPapers)
JEL-codes: C78 D82 O12 (search for similar items in EconPapers)
Date: 2015-09
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