Risk Attitudes and the Shift of Liability from the Principal to the Agent

@inproceedings{PrivileggiRiskAA,
  title={Risk Attitudes and the Shift of Liability from the Principal to the Agent},
  author={Fabio Privileggi and C. Marchese and A Cassone}
}
This paper studies the problem of illegal behavior within a principal-agent framework. The agent performs an illegal activity which benefits the principal, and can exert an effort that negatively affects the likelihood of detection of the violation. Two opposite legal regimes are considered: in the first, only the risk neutral principal is strictly liable; in the second, only the risk averse agent is. The monetary sanction and the probability of detection function are the same in both cases… CONTINUE READING

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