OPTIMAL INPUT COST-SHARING FOR TENANTS - IMPLICATIONS FOR NEGOTIATINGEFFICIENCY

We demonstrate the influence of optimal input cost sharing on the risk -neutral tenant's input choice and income. We determine the shave arra ngements that generate an efficient outcome compared with the owner-op erator's input choices. in an illustration with a corn-peanut rotation in Alabama, we use parametric programming to determine the tenant's o ptimal input cost share for corn fertilizer, a key input, while varyin g the output shares and cost shares of other inputs. The tenant's inco me above variable costs is highest when the cost share permits the lev el of fertilizer to reach the efficient level, at which the optimal fe rtilizer cost share is higher than both the output share and the cost share for other inputs. Owners and tenants may benefit from negotiatin g shares rather than applying simple rules setting all input cost and output shares equal. (C) 1998 Elsevier Science Ltd. All rights reserve d.