1. Explain what are royalty rate contracts and fixed-fee contracts. What is the main difference between them?

2. Give an example of each of the two types of contracts. Explain which type of contract is used in your organization. (If you are not currently employed you can give a hypothetical example or an example from your experience).

3. Describe the differences in the incentive effects of the contracts. What are the advantages and the disadvantages of each of the contracts? Explain the reasons why one of them and not the other is used in your organization. Describe the consequences for your organization of changing the existing contract.

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