No cure, be paid: super-contingent fee contracts

Lambert Schoonbeek and Peter Kooreman

Applied Economics Letters, 2005, vol. 12, issue 9, 549-551

Abstract: A general principal-agent problem with two possible outputs, high or low is considered. The agent's utility function is additively separable in wealth and effort. It is shown that under the optimal contract, the agent should pay a penalty fee to the principal if the low output occurs.

Date: 2005
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DOI: 10.1080/13504850500142544

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