12 January 2011

Where agents are able to set policy

Asymmetry of risk is the mechanism by which agents can insulate themselves from the risks their principals are taking. Limitation of liability is the chief culprit. 
It seems as though limitation of liability should be limited only to those who are not in a position to make decisions about the management of the risks. Where agents are able to set policy, the risks and liabilities should never be limited. 

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