Resource title

Should You Allow Your Agent to Become Your Competitor?: On Non-Compete Agreements in Employment Contracts

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Resource description

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 su? ciently 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.

Resource author

Matthias Kräkel, Dirk Sliwka

Resource publisher

Resource publish date

Resource language

eng

Resource content type

text/html

Resource resource URL

http://hdl.handle.net/10419/22949

Resource license

Adapt according to the presented license agreement and reference the original author.