Ten rules of thumb in contract design: lessons from Danish agriculture

Real contracts balance a number of conflicting objectives that characterise the contracting situation. Contract theory provides useful insights but the formal models used in theoretical analysis tend to focus on a few effects in stylised environments. The risk of a partial approach is that while improving one aspect of a contract, new and more serious problems may arise in other respects. Practical, theory-based contract design can therefore benefit from a more holistic, systemic approach. In this paper, we offer a checklist that can support such an approach. The checklist combines theory with experiences from Danish agricultural contracts.