Explain why agency costs are high and the maintenance of high-powered incentives difficult when the activity to be integrated involves research and development.
Why is it not necessary to have a clerk in a mail room on an incentive contract? Why is it a good idea to have a chief executive officer on an incentive contract?
An American was taking a boat ride up the Yangtze River when she observed a disturbing sight. A group of strong but exhausted men rowing the boat were being whipped and shouted at by an overseer. She complained of this brutality to the captain, demanding that he immediately stop this torture. His reluctant reply was that there was nothing that she or anyone else could do because the men were the ones who hired the overseer to punish them in this way. Explain why the men would hire the overseer.