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Article
Incentive Contracting under Limited Liability
Journal of Economics and Management Strategy
  • Eun Soo Park, Missouri University of Science and Technology
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.

Department(s)
Economics
Document Type
Article - Journal
Document Version
Citation
File Type
text
Language(s)
English
Rights
© 1995 Wiley Blackwell, All rights reserved.
Publication Date
9-1-1995
Publication Date
01 Sep 1995
Disciplines
Citation Information
Eun Soo Park. "Incentive Contracting under Limited Liability" Journal of Economics and Management Strategy Vol. 4 Iss. 3 (1995) p. 477 - 490 ISSN: 1058-6407; 1530-9134
Available at: http://works.bepress.com/eun-soo-park/8/