41 Pages Posted: 2 Apr 2006
Date Written: March 29, 2006
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. It might also lead to exploitation of needy women by couples.
Keywords: Surrogate, Intended parents, Noncontractibility, Under-investment
JEL Classification: I11, J13, L14, L24
Suggested Citation: Suggested Citation
Banerjee, Swapnendu and Basu, Sanjay, Rent a Womb: Surrogate Selection, Investment Incentives and Contracting (March 29, 2006). Available at SSRN: https://ssrn.com/abstract=894022 or http://dx.doi.org/10.2139/ssrn.894022