The paper develops a model of gestational surrogacy, in which a childless couple faces heterogeneous prospective surrogates. High-type surrogates add more value but also have higher outside options. Surrogates can make specific investments for the overall well-being (care) of the unborn child....

We develop a model of commercial gestational surrogacy in which a childless couple approaches a prospective surrogate, who is willing to gestate for the couple. The surrogate’s care is non-contractible. We show that if the surrogate doesn’t have any wealth, at the optimum, she is always...

The paper provides an analytical structure to endogenize the optimal gestational surrogacy contract in terms of a simple moral hazard framework. The study shows that altruistic surrogacy is optimal only if the surrogate has lower outside option and is sufficiently altruistic. Otherwise...