Agency Theory

Stefan Linder, Nicolai Juul Foss

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    Agency theory studies the problems and solutions linked to delegation of tasks from principals to agents in the context of conflicting interests between the parties. Beginning from clear assumptions about rationality, contracting, and informational conditions, the theory addresses problems of ex ante (‘hidden characteristics’) as well as ex post information asymmetry (‘hidden action’), and examines conditions under which various kinds of incentive instruments and monitoring arrangements can be deployed to minimize the welfare loss. Its clear predictions and broad applicability have allowed agency theory to enjoy considerable scientific impact on social science; however, it has also attracted considerable criticism.
    Original languageEnglish
    Title of host publicationInternational Encyclopedia of the Social & Behavioral Sciences
    EditorsJames D. Wright
    Place of PublicationAmsterdam
    Publication date2015
    ISBN (Print)9780080970875
    Publication statusPublished - 2015

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