The right to quit work: An efficiency rationale for restricting the freedom of contract

A principal hires an agent to provide a verifiable service. Initially, the can exert unobservable effort reduce his disutility from providing If is free waive right quit, he may voluntarily sign contract specifying inefficiently large service level, while there are insufficient incentives effort. agent’s quit inalienable, underprovision of be further aggravated, but level ex post efficient. Overall, it turns out that total surplus larger when agents not permitted contractually their work. Yet, we also study extension our model in which even strictly better off parties have contractual freedom quit.