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http://hdl.handle.net/10419/33496
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| Title: | | Should you allow your agent to become your competitor? On non-compete agreements in employment contracts  |
| Authors: | | Kräkel, Matthias Sliwka, Dirk |
| Issue Date: | | 2006 |
| Series/Report no.: | | IZA Discussion Papers 2054 |
| Abstract: | | We discuss a principal-agent model in which the principal has the opportunity to include a non-compete agreement in the employment contract. We show that not imposing such an agreement can be beneficial for the principal as the possibility to leave the firm generates implicit incentives for the agent. The principal prefers to impose such a clause if and only if the value created is sufficiently small relative to the agent's outside option. If the principal can use an option contract for retaining the agent, she will never prefer a strict non-compete agreement. |
| Subjects: | | fine incentive incomplete contracts non-compete agreements option contract |
| JEL: | | D21 D86 J3 K1 M5 |
| Document Type: | | Working Paper |
| Appears in Collections: | | IZA Discussion Papers, Forschungsinstitut zur Zukunft der Arbeit (IZA)
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