A firm wishes to employ an agent. The agent has limited liability so wages are nonnegative, but the firm can punish the agent in a way that is unproductive (e.g. by humiliating them). The firm also can lower the worker’s outside option by purchasing “guns” to harass the agent. More precisely, the timing is: 1. The firm chooses the level of guns, g, at cost k(g). 2. The firm offers a contract ⟨w(y), p(y)⟩ to the agent, where y ∈ {L, H} = {0, 1} is the output, w ≥ 0 is the wage, and p ≥ 0 is the nonpecuniary punishment. If the agent rejects the contract, they receive u − g. 3. If the agent accepts the contract, he chooses effort a ∈ [0, 1] at cost c(a), giving rise to output Pr(y = H) = a.