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Limited Liability and the Trade-off between Risk and Incentives

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Author Info
Matthias Kräkel ()

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Abstract

everal empirical findings have challenged the traditional trade-off between risk and incentives. By combining risk aversion and limited liability in a standard principal-agent model the empirical puzzle on the positive relationship between risk and incentives can be explained.

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File URL: ftp://web.bgse.uni-bonn.de/pub/RePEc/bon/bonedp/bgse3_2007.pdf
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Publisher Info
Paper provided by University of Bonn, Germany in its series Bonn Econ Discussion Papers with number bgse3_2007.

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Length: 9
Date of creation: Apr 2007
Date of revision:
Handle: RePEc:bon:bonedp:bgse3_2007

Contact details of provider:
Postal: Bonn Graduate School of Economics, University of Bonn, Adenauerallee 24 - 26, 53113 Bonn, Germany
Fax: +49 228 73 9221
Web page: http://www.bgse.uni-bonn.de/index.php?id=494

For technical questions regarding this item, or to correct its listing, contact: (Daniel Park).

Related research
Keywords: limited liability; piece rates; risk aversion;

Other versions of this item:

Find related papers by JEL classification:
D01 - Microeconomics - - General - - - Microeconomic Behavior: Underlying Principles
D82 - Microeconomics - - Information, Knowledge, and Uncertainty - - - Asymmetric and Private Information
J3 - Labor and Demographic Economics - - Wages, Compensation, and Labor Costs
M5 - Business Administration and Business Economics; Marketing; Accounting - - Personnel Economics

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References listed on IDEAS
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
  1. Serfes, Konstantinos, 2005. "Risk sharing vs. incentives: Contract design under two-sided heterogeneity," Economics Letters, Elsevier, vol. 88(3), pages 343-349, September. [Downloadable!] (restricted)
  2. Hadar, Josef & Russell, William R., 1971. "Stochastic dominance and diversification," Journal of Economic Theory, Elsevier, vol. 3(3), pages 288-305, September. [Downloadable!] (restricted)
  3. Michael Raith, 2003. "Competition, Risk, and Managerial Incentives," American Economic Review, American Economic Association, vol. 93(4), pages 1425-1436, September. [Downloadable!]
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