Limited Liability and the Trade-off between Risk and Incentives

Kräkel, Matthias (April 2007): Limited Liability and the Trade-off between Risk and Incentives. SFB/TR 15 Discussion Paper No. 201

Abstract

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.

• Item Type: Paper
• Keywords: limited liability, piece rates, risk aversion, risk-incentives trade-off
• Faculties: Special Research Fields > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems; Special Research Fields > Discussion Paper Series of SFB/TR 15 Governance and the Efficiency of Economic Systems > B4 - Die Gestaltung von Turnieren im Rahmen der Corporate Governance
• Subjects: 300 Social sciences > 330 Economics
• JEL Classification: D01, D82, J3, M5
• Language: English