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 if the agent faces limited liability and there is an incentive problem the principal prefers not to impose such a clause if and only if the principal's profits from entering the market are sufficiently large relative to the agent's outside option. If the principal can impose a fine on the agent for leaving the firm, she will never prefer a non-compete agreement.
- Language
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Englisch
- Bibliographic citation
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Series: Bonn Econ Discussion Papers ; No. 4/2006
- Classification
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Wirtschaft
Economics of Contract: Theory
Firm Behavior: Theory
- Subject
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fine
incentives
incomplete contracts
non-compete agreements
option contract
- Event
-
Geistige Schöpfung
- (who)
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Kräkel, Matthias
Sliwka, Dirk
- Event
-
Veröffentlichung
- (who)
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University of Bonn, Bonn Graduate School of Economics (BGSE)
- (where)
-
Bonn
- (when)
-
2006
- Handle
- Last update
-
10.03.2025, 11:44 AM CET
Data provider
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Object type
- Arbeitspapier
Associated
- Kräkel, Matthias
- Sliwka, Dirk
- University of Bonn, Bonn Graduate School of Economics (BGSE)
Time of origin
- 2006
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