In a principal-agent problem, if the contract implies that the more risk-averse agent will bear less risk, we can say that this contract exhibits
A) efficiency in risk-bearing.
B) risk sharing is not optimal because the less risk-averse (or risk-neutral) agent should bear none of the risk.
C) risk sharing is not optimal because all risk should be transferred to the most risk-averse agent.
D) risk sharing is not optimal because risk-neutral agents should face no risk.
A
Economics
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