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Rent a womb: Surrogate selection, investment incentives and contracting

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  • Banerjee, Swapnendu
  • Basu, Sanjay

Abstract

We develop a model of gestational surrogacy, in which a childless couple faces heterogeneous prospective surrogates. High-type surrogates add more value but also have higher outside options. Surrogates can make specific investments for the overall well-being (care) of the unborn child. We show that, under noncontractibility, surrogates invest less (take less care) than the first-best. Couples are also more likely to choose low-type surrogates, who need less compensation for foregoing cheaper outside options. Hence the popular practice of making surrogacy contracts unenforceable might put the unborn child at risk.

Suggested Citation

  • Banerjee, Swapnendu & Basu, Sanjay, 2009. "Rent a womb: Surrogate selection, investment incentives and contracting," Journal of Economic Behavior & Organization, Elsevier, vol. 69(3), pages 260-273, March.
    • Handle: RePEc:eee:jeborg:v:69:y:2009:i:3:p:260-273
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    1. Patrick Bolton & Mathias Dewatripont, 2005. "Contract Theory," MIT Press Books, The MIT Press, edition 1, volume 1, number 0262025760, April.
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    6. Swapnendu Banerjee, 2013. "Gestational Surrogacy Contracts: Altruistic Or Commercial? A Contract Theoretic Approach," Manchester School, University of Manchester, vol. 81(3), pages 438-460, June.
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    Cited by:

    1. Hideshi Itoh & Hodaka Morita, 2015. "Formal Contracts, Relational Contracts, and the Threat-Point Effect," American Economic Journal: Microeconomics, American Economic Association, vol. 7(3), pages 318-346, August.
    2. Amrita Pramanick & Swapnendu Banerjee, 2016. "Optimal Organization of Surrogacy Contracts and Underinvestment," Journal of Quantitative Economics, Springer;The Indian Econometric Society (TIES), vol. 14(2), pages 217-236, December.

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