Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/27167
Authors: 
Budde, Jörg
Kräkel, Matthias
Year of Publication: 
2008
Series/Report no.: 
Bonn econ discussion papers 2008,6
Abstract: 
Several empirical findings have challenged the traditional view on the trade-off between risk and incentives. By combining risk aversion and limited liability in a standard principal-agent model the empirical puzzle ont hepositive relationship between risk and incentives can be explained. Increasing risk leads to a less informative performance signal. Under limited liability, the principal may optimally react by increasing the weight on the signal and, hence, choosing higher-powered incentives.
Subjects: 
moral hazard
limited liability
risk-incentive relationship
JEL: 
D82
D86
Document Type: 
Working Paper

Files in This Item:
File
Size





Items in EconStor are protected by copyright, with all rights reserved, unless otherwise indicated.