3 i The costs of contracting: the tenancy contract The study of contracts |i M contracts lies at the heart of Contracts, whether formal or informal, reall ing parties; the tenancy contract ber the owner of labor and the owner of la the study of property rights. llocate rights among contract Habor = undertakes the bulk of farm activities. Family farming isco mon and lative simply organie. By stuhng tenancy coac a {he context of family farming, it is posible to isolate some basic con- AogipE problems thar maybe obscured in more complex organizations ackground to the analysis of the tenancy contract I offer a critical review of the traditional approac i Tee af the traditional approach to the relationship between tenant ‘THE STUDY OF THE SHARE CONTRACT, AND CHEUNG’S CONTRIBUTION TO IT Price theory textbooks routine! Price sony tn utinely introduce the notion of a production function and discuss the marginal product ofa factor such 28 labor for ren levels of such othe factors as capital and land Given the productiv fy gk the factors and the market pris of factors and product, ti ay determine both th ptm amounts and the vale ofthe con. we of each factor. The assumption that factors are uniform and that ose i formation i freely avaiable ual unde uch disc 4 setting, the problem of organizing production is trivial. These textbook assumptions are violated in telly. in sen weather, pests, and other forces affect forces affect output differently indifferent ois ad in aren neon aon noo pe of ed ee workers are identical to each other. Determining th. tes ofeach, workers are dens ining the properties of ea ic of input requires extensive and costly meastremere, Owing we eer 28 t The costs of contracting the forces that affect output, the specific contributions of individu- als are difficult to determine. Individuals, therefore, can mask their own low-level contributions by attributing them to other forces. Such attempts to capture wealth make cooperation among individuals costly, and, as will be shown, individuals can gain by organizing their transactions in ways that lower these costs. “The inefficiency associated with the share contract is a particular mani- festation of the wealth-capture problem that was recognized long ago and that has received a great deal of attention from economists. Ina share con- tract, a landlord lets a tenant work the land for a share of the output. The tenant's pay to the landlord appears to be similar to an ad valorem tax, and this analogy has been used to suggest that the share contracts inefficient, ‘Consider first, briefly, the ad valorem tax. The demand facing sellers of a taxed commodity is lower than the consumers’ demand by the amount of the tax. Because of the shift in demand, the market equilibrium quan- tity under the tax is less than itis in the absence of the tax. The tax, then, distorts resource allocation: Under the tax, the marginal unit is valued at more than it costs; expanding production would produce a net gain, but the tax creates a wedge that prevents the realization of that gain. ‘Economists have argued that this tax analysis applies directly to the share contract. In Figure 3.r, adapted from Cheung (1969, p. 43), the tenant's marginal product on a plot of a given size is My,, and her or his market wage is W. Were the tenant self-employed, she or he would apply L* units of time to the farm. The landlord, however, receives a share of the output. The tenant whose share of the output is (x ~ r) then retains only (x ~ r) of her or his own marginal product, and in order to maxi- mnize wealth she or he will apply LT units of time to the farm. For units of labor between LT and L*, the output value of the tenant exceeds the wage rate, but the tenant will prefér to sell these units of labor service in the marker, because, per unit of labor, her or his share in the farm output is less than W. Such tenants, then, will stop short of producing the output at which the value of their marginal product equals their aleernative earn- ing. The shaded atea in Figure 3.x is the alleged inefficiency induced by the share contract and is comparable to the tax distortion. “The tax analogy contains two implicit, and by no means innocent, assumptions. One is that landlords find it prohibitively expensive to stipu- late and police the amount of labor input; the other is that landlords encounter no cost in policing the receipt of their share of the output. ‘Whereas either assumption may be a good approximation of real circum- stances in any particular case, the two are unlikely to hold true simulta- neously. The assumptions that the cost of monitoring ousput is always zero and that the cost of monitoring labor input is always prohibitive, implicit in the traditional approach to the share contract, are ad hoc. 29Economic analysis of property rights Produce labor ¥ 7 Figure jax In his ground-breaking work on th 3 ing work on the theory of share tenancy, which he tested empirically against observed practices n Chin, Ghevng 969 al points that are pertinent to the discussion here. The fi nistent with the Coase Theorem, is that in a world of zero transactions costs the share contract will yield an efficient outcome, as will other contract forms. This is because contractors add an her costlessly add and police sharecropping. Among these are fixed plot size, required level Seog Amon he a fe ot ied iro ar ‘ere consistent wih thse implication, Chang proce 0 srgoe that sk aversion may explain the prevalence of hare tenaney, case under f tenancy the landlord and the tenant share in the vagaries of vata recrved analysis that claims that the share contract distorts sxoutes is wel take, his rikaverion explanation isnot aversion does not satisfactorily explain the share contract. Atti- ique of the location 30 The costs of contracting ‘ude toward risk is a matter of taste. If, as we usually assume, taste is a Detsonal matter that may vary unpredictably across individuals, an expla: Ration based on risk aversion is not refutable. Even the assumption of luniformity of tastes toward risk, that is, the making of risk aversion a function of such observable variables as wealth, is stil not sufficient to faplain sharecropping. In a zero transaction cost world, sharecropping by itself is not an attractive method of sharing risk. Share contracting dees distribute the crop of a single plot between the two parties, but there re other ways to distribute variability that can remove more of the risk. For instance, because two persons residing on opposite sides of the globe dre not subject to common random forces, pooling the risks berween them reduces the risk each would face alone. Under the assumption of tpatless transactions, such pooling involves no added costs and thus will be practiced. In reality, of course, transacting is costly, rendering some ak pooling difficult to effect. When transacting is costly, however, all Contract forms are costly; and in that case sharing may be chosen not, OF SPleast not only, for its effect on risk but also because of some properties of transaction costs. Moreover, when transacting is costly, other con- tracts may be chosen in spite of ther riskiness. Next I offer a transaction {Gost hypothesis to explain sharings in subsequent chapters offer transac: tion cost hypotheses to explain other forms of organization, assuming throughout that people are risk-neutral." THREE METHODS OF COLLABORATION BETWEEN OWNERS OF LAND AND OWNERS OF LABOR Given the total amounts of land and labor, there is some plot size or, snore generally, some size distribution of plots that maximizes toral out~ put. Only a fraction of workers, however, own the commensurate Frnount of land, Those who own more land than they can most profitably tultivate by themselves can gain by cooperating with those whose hold- ings are too small. In order to realize’the gains, the factor owners must contact with each other. I consider here three methods by which two Gwners can collaborate and in which ownership patterns are preserved: (2) the wage contract, the share contract. ‘The discussion of the con: It was pointed out ear lidation of ownership wi that individual specimens o' problem between tenant and landlos dividing ouput, the role of sak aversion seems both simple and important. eocrees of variably confront the parties, the role of tsk aversion in for the amsignment of any of such sources becomes much less clear and seer enportene, For instance, ies nota all lear bow transfering che mainte tape gation dcr ome andor 0 the enant affects the distribution of 3Economic analysis of property rights labor are not uniform, and that, in a Variability due to factors such as w pests. Ou l vary from plot to plot nor only because of the varia the inputs but also because of random variability. Characteristics of the variability are crucial to the choice among contracts. Before analyzing the general case in which both land and labor are Yasiable, I will consider the special cases in which either the land or the is uniform. Suppose that land is entirely uniform and unchangeable iboration is by a wage contract, workers can gain by shirking, exer ing themselves less than they would were they self-employed. Because output is subject to variability both because of random factors affecting and because workers’ contributions to output vary itis late the effect of change random factors. Workers, of course, will be supervised, but given that Supervision is costly and subject to economy, workers will not be fully penalized for a reduction in effort, and such a reduction is therefore ex. Wage payment is accordingly adjusted to the expected reduction in imately declines asa result of shirking. isin penalized; workers are paid, on average, for what work they accomplish. Such workers would prefer to work harder and be paid more, because they operate ata point at which the costo them of an extra unit of effort is less than the corresponding value of the increase in output brought about by that effort; butthe cost of effecting such an arrangement exceeds the gain it would generate. Under the given conditions, then, the wage contract requires costly supervision, and labor is not applied at the rate that selfemployed workers would choose. ‘Tenants who operate under share contracts retain a portion, but not all, of their marginal product. Although the incentive to shiek is not as strong here as itis inthe wage contract, i is induced by the same factors, and the préceding discussion of the wage contract applies. Tenants, who collaborate with landowners by renting their land pay a fixed amount for its use. Ouspur will differ from that expected, first, because of random fluctuations, and, second, to the extent that the tem, ants alter their own effort. Since land is uniform, land does not contribute to output variability the tenant function of their own effort s bar- ring bankruptcy, the landlord receives a fixed amount, and the tenant receives whatever is left over after paying the rent (this difference may, of course, be a negative amount). Apart from the random element, tenavt’ reward is strictly a function of their own effort.* “The fact tha th mn, production is subject to fixed-rentcontracs has not been claimed to be ineicien suggests ofthe improvement and equipment thet accompanied ) has been le. On the other hand, economists have been quick t0 cilia 32 cffort from the effect of the | The costs of contracting J situation where land is heterogeneous and labor and abor efor uniform she mirror image ofthe one presented boys, ‘When labor is uniform, wage contracts make expecte coer arin hi of the land only. Landlords, then, have the ri ne aioheent Jjand and wll nt gain fom misrepresent Tandloeds are the residual claimants, an by tei own actions, rental (or share) would be inefcient here, producing es total income for th Contracting parties. The miore efficient contract, that of the contracting partis. ‘under such conditions. _ Fe ae and nor labor is generally wiform. All thre contract forms are, then, subject © efcene problems. When discrepancies costs and valuations are inevitable, an a eatin which TMSpleme are observed cannot be thought of as inf en. Inefceney The analysis of In ah imperfect worl een the best sludon i tll subj to discrepancies between marginal costs and marginal valuations because satigcover Infect, that ecause these are not dacoverable i eli not all such discrepancies can b not a hem in inveougaton stem Satins that cn be ov zon, Out ek i rae, determing Shen te assumption of ganization will be age in resource allocation andi economic organization wil be TRAN abou by a change in circumstances, In order 10 be able to eae a resource allocation, a more detailed discussion of analyze changes in resour. : nature of variability is necessary. igh only /, assumed that land 7 , ye into the nature of eee eatin Bch ae of ile om a ‘others, even from the ones adjacer i eevee eta incidences muse in expone to the wind and sum, Land a dwater, quality and quantity of irrigation canals, altel eon ent, types of roads st ig them, and distance to bias feu. Moreover th cue of exploing such ears ao vases Land se i i \ce his assumption that lar singed out ay tht te share contract ang is hangable i es Peguence Te nebo cocact Would so ave Considered inefficient. THE EFFECTS © Because it is commonly, 33Economic analysis of property rights would be efficient if landlords were compensated by users of land for the ‘exact reduction in land value. Because land is not uniform, however, the exact evaluation of these effects requires measurement at every spot. Exact and comprehensive measurements are obviously. prohibitively costly, and thus measurements are neither exact nor comprehensive. In deed, certain features may not be measured at all. Tenants who can gain from exploiting those land attributes that they ‘re not marginally charged for will use them to the point at which the net gain they yield falls to zero, Thus, even though there are only two patties to the transaction, an unpriced attribute is effectively placed in the public domain. Tenants can capture such an attribute by simply exploiting capture is costly to the transactors because exploitation is carried beyond the point where the value ofits contribution equals the reduction in its value and where the value of the land declines more than the value of output increases. Any land attribute that can be chan, for by the landlord b ged by the tenant and is not charged es a free attribute to the tenant and is then subject to overuse. y changeable land attribute that remains under the landlord’s control will be undersupplied. If the landlord is not contractually committed to maintaining capital improvements, she or he is likely to postpone doing so beyond the contract period. All such inci cient practices reduce joint wealth and ultimately harm the two parties, inducing both to seek methods to lower such ineffciences and to maxi. rize the net value of their resources. METHODS FOR RESTRAINING LOSSES Labor and land are complex factors, each with many attributes, but contracts between pairs of owners are usually quite simple. How are the individual attributes, then, controlled by contract, and what forces deter. ‘mine which contract will maximize the value of the’resources? A fxed- rent land contract can simply stipulate duration and rent; alternatively, it can be as detailed as the contracting parties wish it to be.’ Whereas contractors are free to stipulate whatever they wish, notall attributes are worth stipulating and monitoring. Any attribute that is not stipulated and that can be varied becomes a free attribute. Tenants who are in control of such an attribute will use extra units so long as they generate added Positive (net) income; landlords will similarly use attributes under their control. Although by assumption the loss associated with free attributes is too 2a either case, a mechanism to enforce contract performance is required. Such a ‘mechanism is usally provided partly by the contractors and party by te couse The ‘existence of such a mechanism wil Be taken here as given, 34 ‘The costs of contracting 10 distinct general ways: aly, it can be controlled in ew neal aye stipulations regarding atesbuees related to the on acon or nadequate provision or by switching ent contract that directly controls those attribures costly to avert Manipulating related attributes that are costly to stipulate. nancy contract involves many attributes sy vospulate iy, the parties can affect many dimensions of thei transact it exchange and lower dissipation. order maxing lO mods aed fo harbo-eontal ave Correxponding quanties, and manipulate contrat snes Ne pat a of related commodities ead the cas eer ee fee the soil nutrient, the re eae pope cane si wl a th dp ee Sabotiate vod m ymbined net gain. most of tfecing ‘such a subsidy is the need to fine- tune is Whe = inecenon aoTe cg whe anon of he et con than the loss reduction in. re ie ets eaeeae fertilizer at no charge. ‘ke the method above, lower the deman Fe te a sao ci hi regard t at yutes. A wheatland owner may find a one-year re we ee ‘On ‘the other hand, in the case of an orchard, the 1) wil be fesive only ifthe cost ‘One particular transaction cosEconomic analysis of property rights gn sod Imainignance ofthe tee, which canbe most efficiently provided Tr cant become fee auubutes o a one-year tenant, wheteas a longer-term rental contract enhances the tenant's incentive for care and aintnance, thus reducing the tenant's exploitation ofthese attributes. a The task of cating forthe wees need not be assigned tthe tenant, jst as equipment maintenance sot necessarily a tenant's atk Such ain tens ce mar of che: The coat at expected ann provision of paula zesturm which ary is more suitable. The problem. Ie may seem tha inthe Under contact cleat mh spe cae once ms Te downs os he aod and clleson of eb spac that he el saton mare compe Improvement for insane, at obvious not an intel pre of he land, and the contactors ae fre to decide which pay wil tke char {any of them! More generally, the contactors have le ing hich of them should famish particular abuts ete wwaWith fegatd to each attribute, one can ak; Which of th ‘more inclined than the other to aff vof oupurby manipulating chat attribute? The principle land applies also to individual aribues. If he pasty tat wll be more indined to affec the outcome by varying the level ofan atbuteis putin contol of that abut, becoming therefore the residual claimant of is ‘Seablity, miallocaon wil be tinimied, Uf, for example, land i ve asis, the maintenance of long-lasting impro mens wil endo be placed inthe landlord charge, veae ey are the eneficiaries of proper maintenance through i they can charge for fatue periods ee aA Changing the contract form \¢ preceding section it was shown that thé late pe as shown thatthe ixed-rent contac ‘aut nd ibs ince pubic domain nd hates foes oa rc meet pn odoin of od Gicey convolled may be curbed, then; however i anno bs line nate, Ii proper stk whether cllaboravon between ownes of nd egal sq ke lal Sp cern improvements presen on Sontae is sgned, there so need to spel ths outa Se conte iain the improves she or he wi ‘The costs of contracting and owners of labor should occur through a contract that is an alterna tive to the land-rent contract. “Any contracts subject to problems of non-oprimal use and therefore no single contract is best under all circumstances. Changes in the circum” saa that affect contract choice may be gradual, but the change in sacact form cannot be gradual; either ittakes place oritdoes not. Thus, & SEmpatison between contract forms must be “global”; tora net values sent be calculated in order to determine which contract generates the Fighes¢ nee gain. Economists are not equipped to make such comparisons ensiy. Conditions under which a switch from one form to another is fikely, however, can be spelled out, Turning co the three contract forme hee one refutable implication of the model above is that when market rage aes relative to land rent, the contract form will shift away from the hich induces (relatively) careless use of labor, ro the land- eae entract (though perhaps first to the share contract), which induces TGhnsvely careless use of land. In order to be able to compare the diferent Contract forms, however, we should first study share contracting, ADVANTAGES AND DISADVANTAGES OF SHARING “The share tenancy contract stands halfway between the fixed-rent and the wage contract. When sharing, both the landowner and the tenant are eidual claimants, because each is remunerated by a fraction of whatever the output is. Ar the same time, each gains fom shirking; the landowner willrnct maintain land improvements as vigorously as she or he would Mhder the wage contract, and the tenant will not work as hard as she or he ‘would under the fixed-rent conteact. The margins subject to distortion Tnder the share contract include, then, all those of the other two contracts. Inaddition, the specification and monitoring of ourput are likely to con- sume more resources under the share contract than tnder the other con~ ithough more margins are subject to distortion when the “Contract calls for sharing, the loss from each margin of distortion is re- Saved more than proportionately. Anew angle on the previously discussed fax analogy may demonstrate how the share contract can resultin a lower ‘dof distortions chan the level associated with the other two contracts “The analysis of tax distortions is standard fare in taxation literature, It js well known that the distortion associated with a tax (or with a subsidy) vSoss as the square of the tax (or subsidy) rate. Thus the welfare-loss ‘biangle ofa ro percent tax on a commodity is (approximately) four times te lange as that of a 5 percent tax on the same commodity. In the wage Contract, the reduction in effort isa free attribute available tothe worker, Because the worker is not penalized for the reduced effort; itis as if the easter were to pay a 100 percent tax on the increase in output induced 37Economic analysis of property rights by greater effort. Similarly, under the fixed-rent contract, itis as if the tenant were to receive a 200 percent subsidy on soil nutrients and the landlord were to pay a roo percent tax on land improvements yielding returns within the contract period. In a share contract, these taxes an: subsidies are reduced feom roo percent tothe Worker's sharin the cece of the extra effort; the subsidies are similarly reduced in the case of the spilmutrien, and. tax of roo percent is reduced tothe landlords share in case of the maintenance expenses. A fifty~fifty sharing atrangement would reduce the distortions from each of the attributes to one-fourth of their levels at the 100 percent tax or subsidy. Whereas all of these items are taxed or subsidized in a shate contract, compared with only about ‘alf of them being taxed or subsidized when one or the other of the two contract forms is used, the quadratic relationship is capable of lessening the total burden under the share contract to a oe a t0 a level below that of the burden forms generates. The share contract, however, tals an increase in monitoring costs, which may tp the sale against. fontoring serves to reduce the losses associated with margins of distor, ion, Themontorngof cach margin of dortion, however, ental oa Start-up cost. Since the share contact i subject to more cre tion than ate the other two contrat, ts eos of monitniey ae Nsker The gains the’share contract is capable of generating in reduced distor. tons, then, may not be lage enough, and the shave contract may fal be adopted. As conditions gradually shift, favoring, say, the wage contract ‘over the fxed-cent contract, the share contract b intermediate step; nevertheless, because 4uired, the share contract may be skip contract becomes less attractive sped comple the fraction of rent co} tw fall and the fraction of wage contracts is expected to incre not possible to state, a priori, whether the fraction of share contracts increase or fall. Besides the three contract forms emphasized here, there is ‘one other arrangement that merits special attention: COSTS OF SOLE OWNERSHIP have focused so far on the d costs and gains associated with fixed wages, fixed rents, and share contracts between owners ton ee exchange, Thesole-o different incentive problems, eve and therefore every contract i sujet to some such problems, wnership arrangementis free of those contracting probleme that arise when land and labor arent owned bythe same indie ‘Nor only ia fty—fifty sharing formula simpler to ode te ghettos Uncen en the two partes become more equal sharing arangement's sexe 38 i f | | The costs of contracting seem, then, that sole-ownership should be the preferred method of opera- Fe ey arangeent, bowers, subj twos of transaction costs associated with owning ll ofthe inputs in a production process. The fist set of costs arises because the pattern of ownership of productive non-human assets is extremely unlikely fo match fully the own- hip pattern of human skills chat would have generated the highest out- ‘Total output, then, can people exchange producive reyes in order to arrive ata better match of resources. To accomplish this, owners oflabor would have to borrow in order to buy theland with which ‘work, This would not occur unless transacting is reintroduced ~ here anor ey between boreower and lender replacing that berween ner of labor and owner of land — and it cannot be determined a priori Ghat the transaction between the former two would yield a higher net gain than the transaction between the later two. “The second, and equally important, set of costs of sole owners die tothe losses in specialization that occur when one individual owns fod woes all of the productive inputs. Although sole ownership does incentive to shitk, the gains from specialization are also der to maximize the return from their land, landowners wil eegage in such activities as maintenance work and prevention of erosion. Be Swor of labor wl ives in soc ace a manning and improving their cultivation skills. A person who owns both assets cannot ir eciatze ao muchas the two individual owners ofthe two fssets can. Moreover, the notion chat land and labor can produce output isa gross oversimpification; the ousputis produced by numerous produc: tion factors. Farmers are seldom, if ever, the sole owners ofall inputs. tue contemporary sole-owner farmer in the United States would, among Scher things, have to own and operate her or his own spray plane and ondict her or his own plant research and development. As markets grow larger, the potential gains from specialization should increase, and any one individual should gain from relinquishing ownership of various a5. sets (orattrbutes of some aset) and engaging in contracting with owner Sfother inputs in order to acquire the corresponding services. The gains from sole ownership must, then, be balanced against the falling output caused by the commensurate lower level of specializing. gone. SOME IMPLICATIONS model discussed thus far can generate many im “The contr ‘ can gener with regard to actual tenaney practices. Because informa reat the heart of the igh cost of transacting, I will concentrate on those Jplcations that area direct consequence of information problems. Two soeress of change in information costs will be cansidered, one associated 39Economic anal is of property rights with the introduction of a new crop, the other with the arrival of new workers. ‘When a crop new to an area becomes profitable, information on how well it will do in different locations within the area is more costly to lar information on old ctops. Landowners who person- ally cultivate only part of their holdings and contract with others to caltivate the rest of their land know, asa rule, more about their land than do their tenants. Because they are also the main beneficiaries of good decisions about new crops, the discrepancy. in landlord versus tenant knowledge for the new crop is i may suspect that the rent landlords demand is excessive and that the landlords are exaggerat- ing their plots’ productiveness in growing the new crop. Such suspicion is hard to allay, and so the tenants” demand for land and their associated counteroffers are likely to be low. Wage contracts are free ofthis particu- lar problem bee crop risk, about w! they are better informed than are the tenants. As more landowners switch to the new erop, wage contracts should become more common. In ad; expected that, as time passes, the trend will be reversed, at le with time, the cost of determining the suitability of land parcels to the new crop will decline, inducing the readoption of fixed-rent contracts where they were preferred before. Another information problem arises with immigration. Little is known about how workers who are new to an area will perform. Landowners are reluctant to commit themselves to paying new workers the prev ‘wage. Given the lack of knowledge regarding workers’ tudes, both demand for the services of such workers and, ‘wage offered are likely to below. A new worker who believes that she or he ismore productive than the wage she orheis offered indicates can “guaran- tee” her or his output by offering to operate as a fixed-rent tenant. The ‘worker, then, bears the onus of the information problem. Therefore, ‘expected that relatively more new workers than established ones wi ate as fixed-rent tenants. Moreover, new tenants will be given parcels that are less easy to exploit, such as those containing few improvements. Some old-time tenants may acquire a reputation for being gentle on the land and on improvements; these individuals will be favored. Newcomers do not hhave such reputations and are therefore expected to get land parcels for which the lack of information makes less difference. conctustons The owners of labor and of land can increase the value oftheir assets by collaborating, because toral output is then larger than it would be were 40 ‘The costs of contracting Source of losses from various contractual forms a Tack of Policing Ptiing hod ouput speinng © rs Tignes =e = — Imeediaelows 5 x rs = Lowornoloses #500 10: Sole owner of land and labor Sc: Share contract however eit cond 1 6 operate alone. Effectng the collaboration, sty g ae i is difficult to prevent wealth capture when cooperatiot ni ca eating each factors contibution co ouput i necessary TE RBSant cooperation. Sach measurements ace i 2 and that they individuals can gain at each other's expense se stones nord to capture these ans, Together, owners of bor snd ‘Swnets of land (bolstered by competition from other omnes) wil don the contract renerates the largest net output value where maxi- a io conventional production cass as wal a8 the costs associated with the capture of wealth. hevacyin the eee Neither labor nor land is uniform: specimens of each vay inthe levels of thee efferent attributes. The contract between the owners, therefore, will atempt to control not only the factors as a whole ut also various dividual arcributes. Some of these eee il aiely ays for irrigation water supplied by the lan« | 2 era Pee ntl lec may be contelled indzety by fixing vices, A basic principle underlying the maximiza, individual atibutes I be placed under the contol of the party who can more seadily affect che net value of the outcome by mai the attribute. — he aceompanying able catalogues and compar he loses associated withthe various contractual arrangements analyzed in this chapter. his ings out most clearly that no one solution is best un sale brine Qrcumtances changes the frm of organization wil end to change, t00.