requires the use of an appropriate incentive contract so as to realign his interests with those of the principal. The parties … of the optimal flexible contract both when the parties have sharp probabilistic beliefs over the possible events in which … risk aversion, the higher the agency costs for delegation and hence the less profitable is a flexible contract versus a …

an implicit contract is the threat of exclusion: the agent fears that he will lose future income if the principal breaks …

contract. Both these effects may create higher consumer welfare under market power of the input supplier compared to a …