Which of the following terms best describes a contract that guarantees an agent some payment,but provides enough incentive so that the agent does not shirk?
A)Certainty equivalent contract
B)Risk-sharing contract
C)Risk premium contract
D)Variability reduction contract
E)Risk-averse contract

Question

Quizplus · Accepted Answer

A risk-sharing contract provides guaranteed payment to the agent, while also giving the agent an incentive to work hard and perform well in order to share in the rewards of success. This type of contract balances the needs of both the agent and the principal by mitigating risk and encouraging effort.

Which of the Following Terms Best Describes a Contract That