The dissertation develops a theoretical model to examine the effects of limited liability contracting on learning-by-doing and capital investment within a new agricultural industry. The theoretical model applies to many new bio-based industries, where novel crops are being used to produce goods, such as chemicals and energy, which would not be considered traditional agriculture. Limited-liability contracts create an environment of moral hazard in learning investment and adverse selection in the production of the intermediate good. These two features of the contracting environment present difficulties for the principal to benefit from the learning-induced cost reductions realized at the intermediate stage of production…
Author: Choiniere, Conrad Joseph
Source: University of Maryland
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