Incentive Contracting under Limited Liability
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.
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
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© 1995 Wiley Blackwell, All rights reserved.
01 Sep 1995