No cure, be paid: Super-contingent fee contracts

L. Schoonbeek, P. Kooreman

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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.

Original languageEnglish
Pages (from-to)549-551
Number of pages3
JournalApplied Economics Letters
Volume12
Issue number9
DOIs
Publication statusPublished - 15-Jul-2005

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