Demougin, Dominique M.; Garvie, Devon A. - In: RAND Journal of Economics 22 (1991) 4, pp. 477-489
We examine contractual design in a principal-agent model under two forms of limited liability: nonnegative constraints on the transfer payments to, and the profits of, the agent. We show that when limited liability is a binding constraint, the principal cannot implement the first-best solution...