Solutions to Principal-Agent Problems in Firms

Gary J. Miller
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Gary J. Miller: Washington University in St. Louis

Chapter 14 in Handbook of New Institutional Economics, 2008, pp 349-370 from Springer

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?

Keywords: Nash Equilibrium; Moral Hazard; Executive Compensation; Credible Commitment; Gift Exchange (search for similar items in EconPapers)
Date: 2008
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DOI: 10.1007/978-3-540-69305-5_15

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