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PRICE UNCERTAINTY AND CREDIT-PRODUCT INTERLINKAGE : A NOTE

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Keio Economic Society, Keio University
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Abstract

In the existing theoretical literature on credit-product interlinkage, the trader (interlocker) is not allowed to offer a Fixed-Rental Contract (FRC) where the trader leases-in land from the farmer in exchange of a fixed rent for self-cultivation. But if the trader is allowed to offer an FRC, then the existence and optimality of an interlinked credit-product contract cannot be established. This note purports to provide an explanation for the existence and optimality of an interlinked credit-product contract, even when the trader is allowed to offer an FRC, introducing price uncertainty in the product market.

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