Incentive Contracting under Limited Liability

Eun-Soo Park

Journal of Economics & Management Strategy, 1995, vol. 4, issue 3, 477-90

Abstract: We examine the nature of incentive schemes between the principal and the risk-neutral agent in the presence of the agent's limited liability and ex ante action choice. We consider alternative schemes when a simple rental contract is infeasible due to the limited liability of the agent and study the effectiveness of a performance bonus scheme in achieving the first-best outcome. We also discuss some implications of such schemes in real practices. Copyright 1995 by MIT Press.

Date: 1995
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Persistent link: https://EconPapers.repec.org/RePEc:bla:jemstr:v:4:y:1995:i:3:p:477-90

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