Please indicate whether each of the following statements is true or false: 1. Optimal contracts have to satisfy participation constraints to ensure agents are willing to accept the contract. 2. Optimal contracts have to satisfy incentive compatibility to ensure agents take the action the principal desires. 3. In principal-agent problems, there is generally a tradeoff between efficiency and the allocation of the surplus between the principal and the agent. 4. Firms are generally more risk-averse than their workers so that is efficient for workers to accept any risk associated with the business.

Please indicate whether each of the following statements is true or false: 1. Optimal contracts have to satisfy participation constraints to ensure agents are willing to accept the contract. 2. Optimal contracts have to satisfy incentive compatibility to ensure agents take the action the principal desires. 3. In principal-agent problems, there is generally a tradeoff between efficiency and the allocation of the surplus between the principal and the agent. 4. Firms are generally more risk-averse than their workers so that is efficient for workers to accept any risk associated with the business.

Microeconomic Theory

12th Edition

ISBN:9781337517942

Author:NICHOLSON

Publisher:NICHOLSON

Chapter8: Game Theory

Section: Chapter Questions

Problem 8.11P

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