Is Agency Theory Self-Activating?
Abstract"This article examines the conditions under which the principal-agent model is self-activating/socially causal. We do so by exploring a principal-agent framework that allows for the possibility that rational agents may hold intrinsic preferences for autonomy in decision making and experience disutility from being monitored. Using a dynamic model of preference formation, we identify conditions under which the principal-agent model is self-activating in that, over time, the introduction of the model in an otherwise efficient monitor-worker relationship leads to the inefficient adoption of the agency model. We also examine the extent to which the agency model is robust when autonomy-preferring agents are introduced into the population. "("JEL "G30, L20, C72) Copyright 2007 Western Economic Association International.
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Bibliographic InfoArticle provided by Western Economic Association International in its journal Economic Inquiry.
Volume (Year): 45 (2007)
Issue (Month): 4 (October)
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Web page: http://www.blackwellpublishing.com/journal.asp?ref=0095-2583
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Find related papers by JEL classification:
- G30 - Financial Economics - - Corporate Finance and Governance - - - General
- L20 - Industrial Organization - - Firm Objectives, Organization, and Behavior - - - General
- C72 - Mathematical and Quantitative Methods - - Game Theory and Bargaining Theory - - - Noncooperative Games
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