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GESTATIONAL SURROGACY CONTRACTS: ALTRUISTIC OR COMMERCIAL? A CONTRACT THEORETIC APPROACH

Authors

  • SWAPNENDU BANERJEE

    1. Jadavpur University, India
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    • I am extremely grateful to the Editor of this Journal, Prof. Eyal Winter and an anonymous referee for their incisive and exhaustive comments and for encouraging me to revise the paper. A version of this paper was presented at the conference to honor Prof. Amartya Sen (on his completing 75 years) held in New Delhi in 2008. I thank participants of the conference especially Amartya Sen and Kaushik Basu for their comments and suggestions. Also in am indebted to Hon. Justice Richard Posner for sending one of his rare articles that led to substantial improvement in the quality of this paper. I also acknowledge comments from Rajat Acharyya, Abhijit Banerjee, Indraneel Dasgupta, Maitreesh Ghatak, Parikshit Ghosh, Prabal Roychoudhury, Sudhir Shah and Rohini Somanathan on an earlier draft of the paper. The usual disclaimer applies.


  • Manuscript received 19.6.09; final version received 22.7.10.

Abstract

We in this paper provide an analytical structure to endogenize the optimal gestational surrogacy contract in terms of a simple moral hazard framework. We show that altruistic surrogacy is optimal only if the surrogate has lower outside option and is sufficiently altruistic. Otherwise commercial surrogacy is optimal. We also show that for lower outside option greater social ignominy makes the surrogacy contract relatively more altruistic but the reverse happens when the surrogate has higher outside option. We also point to alternative model specifications and find situations where commercial surrogacy is always optimal irrespective of altruism, outside option and social ignominy.

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