New Contract Model Maximizes Outcomes Despite Limited Liability Challenges
The study looked at how to create the best contracts between two parties when both are taking risks and one has limited liability. The researchers found that a contract called SonBo is the best option, even when the person with limited liability could be held responsible for everything. SonBo contracts are flexible and can adapt to different situations while still being effective. In SonBo contracts, the bonus part is more important than sharing the output.