Limited-Liability and Incentive Contracting with Multiple Projects.
I examine a principal-agent model with multiple projects where a risk-neutral manager is protected by limited liability. The analysis has several interesting implications: (i) incentive problems are shown to be a natural source of economies of scope, as combining multiple projects under the management of a single manager relaxes the limited-liability constraint; (ii) as a result, managers may be overloaded with work and exert inefficiently high effort; and (iii) the analysis has implications for the optimal allocation of projects to different managers. Copyright 2001 by the RAND Corporation.
Year of publication: |
2001
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Authors: | Laux, Christian |
Published in: |
RAND Journal of Economics. - The RAND Corporation, ISSN 0741-6261. - Vol. 32.2001, 3, p. 514-26
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Publisher: |
The RAND Corporation |
Saved in:
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