Second,/,themeticulousreadermayrightlypointoutthatthemarginalproductor,however,resultinginamarginalfarmingcost(whichincludesalltenantinputs)beinghigherthanthemarginalreturn.

[1].Notealsothatunder

oftheannualyieldthelandownercannotconvertasharecontracttoafixedrentcontracttoprotecthiswealth.

[2].Linearhomogeneousproductionfunctionisassumedhere.

www.youxs.org—IllustratedwithInputAdjustmentsforMultipleTenants

Theimplicationofincreasedfa,(a)thelandowneremploysalargenumberoftenantsonhislandholdings;(b)thetenantsarecultivatinghomogeneousland,producingthesameproductwithidenticalproductionfunctions,andthustheinitialequilibriumrentalpercentageforeachtenantbeforethesharerestrictionisthesame;and(c)thereisonlyonetenantinput,saylabor.

Infigure7,totalproductismeasuredalongtheverticalaxis,andthenumberoftenantsortenantworkers,t,

isthetotalproductoftenantworkers,withthetotallandholdingofalandownerheldconstant(withassumptiona).,withWrepresentingthewagerateandtthenumberofworkers(withassumptionc).Underapetitivetenantlabormarket,

,Wt,fromthetotalproduct,.

Withoutlegalsharerestriction,theequilibriumnumberoftenantsemployedwillbeot,wherethetotalrent

,thetotalrentwillbetb(=ta—ti),andtherentalpercentagechargedforeachtenantequaltotb/ta(withassumptionb).Inequilibrium,themarginaltenantcostequalsthemarginalproduct,www.youxs.org.,

=W=

Asaresultofthepercentagerentreduction(sayfrom70percentto40percent),theshareconstrainttothelandownerisrepresentedbythecurve

,whereQisthetotalproductand

is40percentof

,ontheotherhand,

andwithnoadjustmentinfarmingintensity,thelandownerstotalsharewillbetd,andthetenantssharetc(=ta—td).GiventhetenantcostconstraintofWt,however,thelandownerwillincreasetenantinputtot,whereboth

and

aremaximizedsubjecttotheconstraintsof

andWt;thatis,Wt=.

Employingtenantsotonthegivenland,thelandownerssharewillbetg,,thetotalrentcurvesubjecttotheconstraintsof

andWtwillbetheheavyline

,whichriseswith

fromotogandkinksdownwardalongwith

Theportionof

fromgtokmeasuresthedifferenceof

andWt,whichmeansthattheconstraintofWtexceedsthecon-straintof

hasadiscontinuousderiv-ative,andthemarginalreceipt,

,isundefinedatg,where

isatamaximum.[1]Ifthelimitofthephysicalconstraint(pointjinfigure)isnotreached,maximum

isattainedwhenWt=[123b],orthealternativeearningoftenantlaborequalsitsineasashareof

(seepointeinfigure).Restingatg(ore),therefore,isanewequilibriumbasedonthepremiseofrentalmaximizationsubjecttotheadditionallegalconstraintof.

Atthisequilibrium,themarginaltenantcost,

=W,isgreaterthanthemarginalproduct,.

Ifthetenantsalternativeearningsarelower,withwagerateW,,tomaximizeinethelandownerwillonlyallowtheincreaseintenantinputtot”,where

,t

willnowbeatj,wherewehave

Inthiscase,however,thetenantswillbereceivingresidualsovertheiralternativeearnings;andwithpensatingpaymentstothelandownerassumedaway,thenewequilibriumundertheconstraintof

:inducingtenantinputtot”,thelandownerwantstopause;however,otherpotentialtenantseknockingathisdoor,,theconditionwithWtisnotimportanttoouranalysis,foratanyratefarmingintensityisincreasedundertheconstraintof.

Thoughthemarginalproductoflandcannotbeconvenientlyderivedinfigure7theeconomicimplicationsofthelegalsharerestrictionforresourc,resourcesaredirectedtotenantfarmsfromownerfarms,fromtenantfarmsunaffectedbythesharerestriction,,thetenantnowworkslongerhours,cultivatesthelandmoreintensively,rreturnsthansimilarresourcesemployedelsewhere.