. Under unlimited liability, the principal strictly benefits from a gap by partially insuring the agents and thereby reducing … labor costs. If the agents are protected by limited liability, the principal sticks to the standard tournament. …

Prior to the Great Depression, regulators imposed double liability on bank shareholders to ensure financial stability … and protect depositors. Under double liability, shareholders of failing banks lost their initial investment and had to pay … up to the par value of the stock in order to compensate depositors. We examine whether double liability was effective at …