Limited Liability and the Trade-off between Risk and Incentives

Several 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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Year of publication:	2007-04
Authors:	Kräkel, Matthias
Institutions:	Volkswirtschaftliche Fakultät, Ludwig-Maximilians-Universität München
Subject:	limited liability \| piece rates \| risk aversion \| risk-incentives trade-off

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Extent:	application/pdf
Series:	Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems.
Type of publication:	Book / Working Paper
Classification:	D01 - Microeconomic Behavior: Underlying Principles ; D82 - Asymmetric and Private Information ; J3 - Wages, Compensation, and Labor Costs ; M5 - Personnel Economics
Source:	RePEc - Research Papers in Economics

Persistent link: https://www.econbiz.de/10005785842