Please use this identifier to cite or link to this item: http://hdl.handle.net/10419/22949
Authors: 
Kräkel, Matthias
Sliwka, Dirk
Year of Publication: 
2006
Series/Report no.: 
Bonn Econ Discussion Papers No. 4/2006
Publisher: 
University of Bonn, Bonn Graduate School of Economics (BGSE), Bonn
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 if the agent faces limited liability and there is an incentive problem the principal prefers not to impose such a clause if and only if the principal's profits from entering the market are sufficiently large relative to the agent's outside option. If the principal can impose a fine on the agent for leaving the firm, she will never prefer a non-compete agreement.
Subjects: 
fine
incentives
incomplete contracts
non-compete agreements
option contract
JEL: 
J3
M5
D86
D21
K1
Document Type: 
Working Paper

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