Incentive Contracting under Limited Liability
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.
Recommended Citation
Park, E. S. (1995). Incentive Contracting under Limited Liability. Journal of Economics and Management Strategy, 4(3), pp. 477-490. Wiley Blackwell.
The definitive version is available at https://doi.org/10.1111/j.1430-9134.1995.00477.x
Department(s)
Economics
International Standard Serial Number (ISSN)
1058-6407; 1530-9134
Document Type
Article - Journal
Document Version
Citation
File Type
text
Language(s)
English
Rights
© 1995 Wiley Blackwell, All rights reserved.
Publication Date
01 Sep 1995
