Agents prefer a behavior-based contract when _____.
A)they are inclined toward risk-taking
B)the job outcomes are measurable
C)they require higher compensation
D)outcome uncertainty is high
E)they want to minimize monitoring by principal

Question

Quizplus · Accepted Answer

Agents are less willing to have their pay linked to profits to the extent that there is a risk of low profits and the outcome is uncertain. They would therefore prefer a behavior-oriented contract.

Agents Prefer a Behavior-Based Contract When _____