TY  - RPRT
        AU  - Kräkel, Matthias
AU  - Sliwka, Dirk
        TI  - Should You Allow Your Agent to Become Your Competitor? On Non-Compete Agreements in Employment Contracts
        PY  - 2006/Mar/
        PB  - Institute of Labor Economics (IZA)
        CY  - Bonn
        T2  - IZA Discussion Paper
        IS  - 2054
        UR  - https://www.iza.org/publications/dp2054
        AB  - 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.
        KW  - incomplete contracts
KW  - fine
KW  - option contract
KW  - non-compete agreements
KW  - incentives
        ER  -