Grochulski, Borys; Zhang, Yuzhe - In: Theoretical economics : TE ; an open access journal in … 18 (2023) 1, pp. 381-419
principal-agent moral hazard model of Sannikov (2008). We find that temporary suspension of the agent after poor performance … dominates termination if the principal's outside option is low and the agent's outside option is moderate. In suspension, the … incentives to be restored without terminating. If the agent's outside option is low, suspension is ineffective because it …