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Solutions to Principal-Agent Problems in Firms

In: Handbook of New Institutional Economics

Author

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  • Gary J. Miller

    (Washington University in St. Louis)

Abstract

There are many settings in which one economic actor (the principal) delegates authority to an agent to act on her behalf. The primary reason for doing so is that the agent has an advantage in terms of expertise or information. This informational advantage, or information asymmetry, poses a problem for the principal—how can the principal be sure that the agent has in fact acted in her best interests? Can a contract be written defining incentives in such a way that the principal can be assured that the agent is taking just the action that she would take, had she the information available to the agent?

Suggested Citation

  • Gary J. Miller, 2008. "Solutions to Principal-Agent Problems in Firms," Springer Books, in: Claude Ménard & Mary M. Shirley (ed.), Handbook of New Institutional Economics, chapter 14, pages 349-370, Springer.
    • Handle: RePEc:spr:sprchp:978-3-540-69305-5_15
    DOI: 10.1007/978-3-540-69305-5_15
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    Citations

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    Cited by:

    1. Will, Matthias Georg, 2012. "Erfolgreicher organisatorischer Wandel durch die Überwindung von Risiken: Eine interaktionstheoretische Perspektive," Discussion Papers 2012-19, Martin Luther University of Halle-Wittenberg, Chair of Economic Ethics.
    2. Will, Matthias Georg, 2012. "Successful organizational change through win-win: How change managers can organize mutual benefits," Discussion Papers 2012-20, Martin Luther University of Halle-Wittenberg, Chair of Economic Ethics.
    3. Julia Mueller & Birgit Renzl & Matthias Georg Will, 2020. "Ambidextrous leadership: a meta-review applying static and dynamic multi-level perspectives," Review of Managerial Science, Springer, vol. 14(1), pages 37-59, February.
    4. Páez-Pérez, David & Sánchez-Silva, Mauricio, 2016. "A dynamic principal-agent framework for modeling the performance of infrastructure," European Journal of Operational Research, Elsevier, vol. 254(2), pages 576-594.
    5. Will, Matthias Georg, 2012. "Change Management und Interaktionspotentiale: Wie Rationalfallen den organisatorischen Wandel blockieren," Discussion Papers 2012-9, Martin Luther University of Halle-Wittenberg, Chair of Economic Ethics.
    6. Duchoslav, Jan & Cecchi, Francesco, 2019. "Do incentives matter when working for god? The impact of performance-based financing on faith-based healthcare in Uganda," World Development, Elsevier, vol. 113(C), pages 309-319.

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