Capacity Constraints in Principal-Agent Problems

Published 2 Dec 2024 in econ.TH | (2412.01760v1)

Abstract: Adding a capacity constraint to a hidden-action principal-agent problem results in the same set of Pareto optimal contracts as the unconstrained problem where output is scaled down by a constant factor. This scaling factor is increasing in the agent's capacity to exert effort.

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Authors (1)

Aubrey Clark

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