Accession Number : ADA151436
Title : The Economics of Agency.
Descriptive Note : Technical rept.,
Corporate Author : STANFORD UNIV CA INST FOR MATHEMATICAL STUDIES IN THE SOCIAL SCIENCES
Personal Author(s) : Arrow,K J
Report Date : Oct 1984
Pagination or Media Count : 30
Abstract : The agency relationship is a pervasive fact of economic life. Even in the limited sense in which the concept has traditionally been understood in ordinary and in legal discourse, the principal-agent relation is a phenomenon of significant scope and economic magnitude. But economic theory has recently recognized that analogous interactions are virtually universal in the economy, at least as one significant component of almost all transactions. The common element is the presence of two individuals. One (the agent) must choose an action from a number of alternative possibilities. The action affects the welfare of both the agent and another person, the principal. In this study of organizational efficiency this report discusses the following topics: (1) The Two Types--Hidden Action and Hidden Information;(2) Example--Public Utility Rate Setting; (3) Multiple Principles; (4) The Hidden-Action Model; (5) Monitoring; (6) Multiple Agents and Repeated Relations; (7) An Evaluation of Agency Theory.
Descriptors : *ORGANIZATIONS , *ECONOMICS , COMMERCE , MANAGEMENT , MONITORING , THEORY , EFFICIENCY , PERSONNEL , PUBLIC RELATIONS
Subject Categories : Administration and Management
Economics and Cost Analysis
Distribution Statement : APPROVED FOR PUBLIC RELEASE