Modeling of a landlord-tenant agricultural system in the environmental context

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A hierarchical economic-environmental model is formulated to analyze the sustainable management of farming production in a landlord-tenant system. The problem under study is interdisciplinary and combines various agricultural, economic, social, and environmental factors. To maximize profit, the landlord chooses a rental payment and the duration of a lease contract. Tenants invest into farmyard fertilizer in order to improve future crop growth and maximize their profit. It is shown that the qualitative behavior of optimal trajectories in the landlord-tenant problem is mostly affected by environmental conditions rather than by the end-of-horizon and delay effects. A range of model parameters is identified, where the optimal trajectory coincides with the first-best environmentally and socially efficient solution.

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