Organisation Theory: The Principal-Agent Perspective
Keywords:
organisation theory, incentives, contracting, considerations in contracts, quid pro quo, cui bono, asymmetric information, simple contracts â€" comple, simple contracts - comple
Abstract
Today much relevant questions concern Who get what, when and how?, due to the incredible rise in the remuneration of the economic, cultural and political elites in the large organisations around the world. A suitable conceptual framework for the analysis of the fundamental question, namely Cui Bono?, is the principal-agent approach from recent advances in game theory. The skyrocketing of the salaries and bonuses of CEO:s in the private sector and the spreading out of corrupt practices in the public sector forces the social science to ask the quid pro quo question about the relationship between the remuneration of agents and their delivery of outputs to the principal. It is truly fruitful for the understanding of political organisation in whatever form it takes. Politics everywhere is about contracting, introducing a web of contracts between principal and agents. The shape of these contracts determines the real constitution of a country.
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2014-10-23
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