Balmaceda, F.; Balseiro, S.R.; Correa, J.R.; … - Centro de Economía Aplicada, Universidad de Chile - 2010
In this paper we quantify the potential social-welfare loss due to the existence of limited liability in the principal-agent problem. The worst-case welfare loss is defined as the largest possible ratio between the social welfare when the agent chooses the effort that is optimal for the system...