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| Title
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Governance by Contractual Rules
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| Subtitle
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Improving Service Relations in Irrigation
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| Author
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Wolff, B., Huppert W.
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| Editor or Organisation
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GIZ
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| Year
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2000
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| Keywords
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irrigation farming, farm management, maintenance, contract, management, rights, service provision, legal framework
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| Country
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developing countries
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| Type
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publication
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| Language
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English
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| Table of Contents
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1. Interaction and Exchange Systems: Control by Contract
2. Complete versus Incomplete Contracts
3. Solving Contract Specific Problems in Service Provision
4. Summary and Outlook
References
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| Abstract
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Every type of exchange system or human interaction can be described as an explicit and/or implicit contractual relationship. The provisions of the contract specify the mutual claims and obligations in a relationship that must be, in the end, beneficial to both parties. If the process of fulfilling these claims and obligations is designed in a verifiable and enforceable manner, both parties will contribute and receive whatever it takes to make the joint business a success. This idea can also be applied to service relationships in irrigation. Unfortunately, it is not always possible to write a contract specifying all the details the relationship entails. Not all exchange contracts are complete ‘by birth’. Long-term relationships can be incomplete in as far as the future is not completely predictable and there are limits to the amount of information an individual can collect and process. Information asymmetries as well as unilateral specific investments leave room for opportunistic behaviour. If actors involved in irrigation projects have private interests other than pursuing the success of the project, they might have incentives to take advantage of others, who are informationally disadvantaged or locked into the project by specific investments. In this paper, a more detailed analysis of incomplete contracts is provided, distinguishing adverse selection, moral hazard, and hold-up risks in exchange relationships.
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| Permission
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Yes
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| Category
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Enabling Environment
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| File
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