Agency Problems In Public Sector
Agency theory analyses the effects of contractual behaviour between two parties: principal(s) and agent(s). This relation is inevitably characterized by information asymmetry because agent holds a substantially larger volume of information than the principal. Due the negative effects of information asymmetry for the principal, this should cover supplementary costs with monitoring agents and/or grant incentives. The first objective of this paper is to emphasize the effects of information asymmetry, particularly on adverse selection and moral hazard. The second objective is to evaluate the negative effects of information asymmetry and to assess the viability of solutions proposed by scholars for mitigation. The third objective is linked with personal contribution, respectively to highlight specificity of agency theory in public sector and the mechanisms of action in this particular field. In this paper, literature is mainly based on scholarsÃ¢â‚¬â"¢ contribution to the proposed theme. Little literature approaches agency theory in public sector, in most cases the analysis being restricted to general issues. Research methodology is based on synthesizing relevant information from literature and adapting them to public sector particularities. The results reflect some threats for public bodies in their contracting activity. Conclusions present also a set of solutions which could be used by public institutions to optimize their activity of mitigating information asymmetryÃ¢â‚¬â"¢s effects. These solution guidelines could represent a useful instrument for make more efficient public money spending. Personal contribution and the novelty of this paper consist in presenting a new approach regarding mechanisms of managing information by agents. In case of public institutions, principals have more opportunities the take possession over the information managed by the agent. Nevertheless, agents can limit the principalÃ¢â‚¬â"¢s access to vital information by offering excessively much information, combining few vital data with numerous unimportant information. For further research, agentÃ¢â‚¬â"¢s information management should be depth and analyzed in which manner principal can control it.
Volume (Year): 1 (2012)
Issue (Month): 1 (July)
|Contact details of provider:|| Postal: Universitatii str. 1, Office F209, 410087 Oradea, Bihor|
Fax: 004 0259 408409
Web page: http://anale.steconomiceuoradea.ro/
More information through EDIRC
Please report citation or reference errors to , or , if you are the registered author of the cited work, log in to your RePEc Author Service profile, click on "citations" and make appropriate adjustments.:
- Faure-Grimaud, Antoine & Laffont, Jean-Jacques & Martimort, David, 2003.
"Collusion, Delegation and Supervision with Soft Information,"
IDEI Working Papers
167, Institut d'Économie Industrielle (IDEI), Toulouse.
- Antoine Faure-Grimaud & Jean-Jacques Laffont & David Martimort, 2003. "Collusion, Delegation and Supervision with Soft Information," Review of Economic Studies, Oxford University Press, vol. 70(2), pages 253-279.
- Aloisio Pessoa_de_Araujo & Humberto L. Moreira, 2000. "Adverse Selection Problems without The Single Crossing Property," Econometric Society World Congress 2000 Contributed Papers 1874, Econometric Society.
- Leonidas Enrique de la Rosa, 2007.
"Overconfidence and Moral Hazard,"
Economics Working Papers
2007-08, Department of Economics and Business Economics, Aarhus University.
- Daniela MARINESCU & Dumitru MARIN, 2011. "Adverse Selection Models with Three States of Nature," Theoretical and Applied Economics, Asociatia Generala a Economistilor din Romania - AGER, vol. 0(2(555)), pages 33-46, February.
- Gifford, Sharon, 1999. "Efficient moral hazard," Journal of Economic Behavior & Organization, Elsevier, vol. 40(4), pages 427-442, December.
- Jeon, Seonghoon, 1996. "Moral hazard and reputational concerns in teams: Implications for organizational choice," International Journal of Industrial Organization, Elsevier, vol. 14(3), pages 297-315, May.
- Itoh Hideshi, 1993. "Coalitions, Incentives, and Risk Sharing," Journal of Economic Theory, Elsevier, vol. 60(2), pages 410-427, August.
When requesting a correction, please mention this item's handle: RePEc:ora:journl:v:1:y:2012:i:1:p:708-712. See general information about how to correct material in RePEc.
For technical questions regarding this item, or to correct its authors, title, abstract, bibliographic or download information, contact: (Catalin ZMOLE)
If references are entirely missing, you can add them using this form.