Principal-Agent Theory: Understanding the Relationship between Principals and Agents, Slides of Business Administration

Download Principal-Agent Theory: Understanding the Relationship between Principals and Agents and more Slides Business Administration in PDF only on Docsity! IMG - Unit 4 16 Self-Selection • Principal offers multiple variants of a contract • Agent reveals own assessment of characteristics and intentions by choosing the most favorable one. • Examples: – Co-insurance / Deductibles Docsity.com IMG - Unit 4 17 Principal-Agent Problems: Links to Previous Topics Staff Staff Staff Staff Staff Staff Staff Entrepreneur IMG - Unit 4 21 Professur für Allgemeine BWL, insbesondere E-Business Chair of General Management and E-Business Prof. Dr. Martin Hepp Asset Specificity Market and Hierarchy: A Continuum in between H ie ra rc hy O nl y In di vi du al s A ct in g on M ar ke ts cf. Wigand/Picot/Reichwald (1997) Docsity.com IMG - Unit 4 20 Market and Hierarchy: A Continuum in between H ie ra rc hy O nl y In di vi du al s A ct in g on M ar ke ts cf. Wigand/Picot/Reichwald (1997) Docsity.com IMG - Unit 4 21 Impact on Coordination? Tr an sa ct io n C os ts Market Hybrid Form Hierarchy cf. Wigand/Picot/Reichwald (1997) Specificity Docsity.com IMG - Unit 4 22 Arbitrage • Exploiting differences in prices for goods on different markets • Based on „informational lead“ • Important role – by exploiting the opportunity, arbitrator destroys the opportunity – makes markets more efficient and integrates fragmented markets • Bridging discrepancies in time, location, and quantity Docsity.com IMG - Unit 4 25 Contract Theory • Classical contract: – commodities – short-term – change of partners easy, no dependencies • neo-classical – as above, but spans some time – spec already an approximation – explicit mediation rules • relational – contract is only an approximation Docsity.com IMG - Unit 4 26 Information as Signal and Symbol • Information behavior has signaling effects • Information used mainly to refute expected criticism • In particular, if consequences are to be carried by the decision-maker but not information costs • Typical example: Business consulting cf. Wigand/Picot/Reichwald (1997) Docsity.com IMG - Unit 4 27 Context Variables (O‘Reilly) • The likelihood that information is considered increases with – more power of the informing party – relevance for task completion (subjective/objective) – strong relationship with control and evaluation systems (e.g. peer-reviewed journal) – contribution to positively sanctioned actions – compliance with decion-maker‘s goals – little conflict with cooperation partners – degree of accessibility (online, good writing,...) – conciseness – degree of personal contact – degree of trust in the source cf. Wigand/Picot/Reichwald (1997) Docsity.com