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In economic theory, the principal-agent approach (also called agency theory) is part of the field contract theory. [36] [37] In agency theory, it is typically assumed that complete contracts can be written, an assumption also made in mechanism design theory. Hence, there are no restrictions on the class of feasible contractual arrangements ...
Since there is asymmetric information, where the principal is not necessarily aware of what the agent is doing, moral hazard can exist: the agent can act in such a way that the agent's own interests are met, rather than those of the principal. [4] This is called the principal–agent problem and is an important theory in economics and political ...
Pages in category "Schools of economic thought" The following 95 pages are in this category, out of 95 total. ... Marxian economics; Modern monetary theory;
In the history of economic thought, a school of economic thought is a group of economic thinkers who share or shared a mutual perspective on the way economies function. While economists do not always fit within particular schools, particularly in the modern era, classifying economists into schools of thought is common.
In theory, agents will only take on bonding costs where the marginal benefit of these costs are equal to or greater than the marginal cost to the agent. Bonding costs may reduce the steps that a principal will need to take to monitor the agent. Therefore, the agent's acceptance of these costs may produce a higher utility outcome for both ...
In economics, an agent is an actor (more specifically, a decision maker) in a model of some aspect of the economy. Typically, every agent makes decisions by solving a well- or ill-defined optimization or choice problem. For example, buyers and sellers are two common types of agents in partial equilibrium models of a single market.
A key concept of Rational Choice Institutionalism is the principal-agent model borrowed from Neo-classical economics. This model is used to explain why some institutions appear to be inefficient, suboptimal, dysfunctional or generally go against the intentions of the actors who created the institution.
They are most commonly studied in the context of principal-agent problems. [citation needed] Principal-agent theory addresses issues of information asymmetry. [7] Here, the government is the principal, and the operator the agent, regardless of who owns the operator. Principal-agent theory is applied in incentive regulation and multi-part ...