Consider an agent who can costlessly add mean-preserving noise to his output. To deter such risk-taking, the principal … optimally offers a contract that makes the agent's utility concave in output. If the agent is risk-neutral and protected by … limited liability, this concavity constraint binds and so linear contracts maximize profit. If the agent is risk averse, the …

We analyze optimal contractual arrangements in a bilateral R and D partnership between a risk-averse provider that … conducts early-stage research, followed by a regulatory verification stage, and a risk-neutral client that performs late … inherent incentive alignment problems of double-sided moral hazard, risk aversion and holdup. We compare the efficacy of …