Consider a simple one-period model where a creditor provides $I$ as investment to a firm and firm produces $\pi_G$ or $\pi_B$ depending on its performance. Let $R_i$ the portion of the profit that the firm transfers to investor, where $i=\{G,B\}$.
My Questions
(1) If we enforce limited liability structure in an agency problem, why is it that:
$$\pi_i\geq R_i.$$
(2) In an agency problem, is it reasonable to have this assumption? Why have limited liability as constraint at all?