Template-Type: ReDIF-Paper 1.0
Title: Should You Allow Your Agent to Become Your Competitor? -- On Non-Compete Agreements in Employment Contracts
Author-Name: Matthias Kräkel
Author-Name: Dirk Sliwka
Author-Email: m.kraekel@uni-bonn.de
Classification-JEL: D21, D86, J3, K1, M5
Keywords: fine, incentives, incomplete contracts, non-compete agreements
Abstract: 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.
Note: 
Length: 28
Creation-Date: 2006-03	
Revision-Date: 
File-URL: http://www.wiwi.uni-bonn.de/bgsepapers/bonedp/bgse4_2006.pdf
File-Format: application/pdf
Handle: RePEc:bon:bonedp:bgse4_2006