Arbeitspapier
Should you allow your agent to become your competitor? On non-compete agreements in employment contracts
We discuss a principal-agent model in which the principal has the opportunity to include a non-compete agreement in the employment contract. We show that not imposing such an agreement can be beneficial for the principal as the possibility to leave the firm generates implicit incentives for the agent. The principal prefers to impose such a clause if and only if the value created is sufficiently small relative to the agent's outside option. If the principal can use an option contract for retaining the agent, she will never prefer a strict non-compete agreement.
- Language
-
Englisch
- Bibliographic citation
-
Series: IZA Discussion Papers ; No. 2054
- Classification
-
Wirtschaft
Firm Behavior: Theory
Economics of Contract: Theory
- Subject
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fine
incentive
incomplete contracts
non-compete agreements
option contract
- Event
-
Geistige Schöpfung
- (who)
-
Kräkel, Matthias
Sliwka, Dirk
- Event
-
Veröffentlichung
- (who)
-
Institute for the Study of Labor (IZA)
- (where)
-
Bonn
- (when)
-
2006
- Handle
- Last update
-
10.03.2025, 11:42 AM CET
Data provider
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ZBW - Deutsche Zentralbibliothek für Wirtschaftswissenschaften - Leibniz-Informationszentrum Wirtschaft. If you have any questions about the object, please contact the data provider.
Object type
- Arbeitspapier
Associated
- Kräkel, Matthias
- Sliwka, Dirk
- Institute for the Study of Labor (IZA)
Time of origin
- 2006
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