Capacity Constraints in Principal-Agent Problems

Aubrey Clark

Papers from arXiv.org

Abstract: Adding a capacity constraint to a hidden-action principal-agent problem results in the same set of Pareto optimal contracts as the unconstrained problem where output is scaled down by a constant factor. This scaling factor is increasing in the agent's capacity to exert effort.

Date: 2024-12
New Economics Papers: this item is included in nep-mic
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