This paper addresses the question of how the principal's surplus and agency costs depend on the agent's wealth. Our main results are: If the agent has an additively separable utility function in income and effort and his degree of absolute prudence is smaller than three times the agent's degree...

This paper addresses the question of how the principal's surplus and agency costs depend on the agent's wealth. Using the first-order approach, we identify properties of the agent's utility function which are sufficient conditions to guarantee that richer agents induce a lower expected surplus...