Epistemics at Work

The Theory of Mind in Principal-Agent Relations

    Research output: Working paperResearch

    Abstract

    Agency theory studies the impact of and remedies to asymmetrically distributed information in principal-agent relations. Yet, it does so in a surprisingly binary manner: It assumes the principal to be perfectly knowledgeable of some pieces of information (such as the agent’s risk aversion), while others (such as the agent’s true effort exerted) are considered to be perfectly private information of the agent. Agency theory thus makes very asymmetrical assumptions about the knowledge of principals and agents, largely neglecting the human capacity for interpersonal sense-making. This chapter explores the implications of instilling agency theory with a more realistic account of the human capacity to read other people’s desires, intentions, knowledge, and beliefs - that is, to have a theory of someone else’s mind.
    Original languageEnglish
    Place of PublicationFrederiksberg
    PublisherCopenhagen Business School [wp]
    Number of pages39
    ISBN (Print)9788791815959
    Publication statusPublished - Feb 2014

    Cite this

    Linder, S., Foss, N. J., & Stea, D. (2014). Epistemics at Work: The Theory of Mind in Principal-Agent Relations. Frederiksberg: Copenhagen Business School [wp].
    Linder, Stefan ; Foss, Nicolai Juul ; Stea, Diego. / Epistemics at Work : The Theory of Mind in Principal-Agent Relations. Frederiksberg : Copenhagen Business School [wp], 2014.
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    abstract = "Agency theory studies the impact of and remedies to asymmetrically distributed information in principal-agent relations. Yet, it does so in a surprisingly binary manner: It assumes the principal to be perfectly knowledgeable of some pieces of information (such as the agent’s risk aversion), while others (such as the agent’s true effort exerted) are considered to be perfectly private information of the agent. Agency theory thus makes very asymmetrical assumptions about the knowledge of principals and agents, largely neglecting the human capacity for interpersonal sense-making. This chapter explores the implications of instilling agency theory with a more realistic account of the human capacity to read other people’s desires, intentions, knowledge, and beliefs - that is, to have a theory of someone else’s mind.",
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    author = "Stefan Linder and Foss, {Nicolai Juul} and Diego Stea",
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    Linder, S, Foss, NJ & Stea, D 2014 'Epistemics at Work: The Theory of Mind in Principal-Agent Relations' Copenhagen Business School [wp], Frederiksberg.

    Epistemics at Work : The Theory of Mind in Principal-Agent Relations. / Linder, Stefan; Foss, Nicolai Juul; Stea, Diego.

    Frederiksberg : Copenhagen Business School [wp], 2014.

    Research output: Working paperResearch

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    AU - Stea, Diego

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    N2 - Agency theory studies the impact of and remedies to asymmetrically distributed information in principal-agent relations. Yet, it does so in a surprisingly binary manner: It assumes the principal to be perfectly knowledgeable of some pieces of information (such as the agent’s risk aversion), while others (such as the agent’s true effort exerted) are considered to be perfectly private information of the agent. Agency theory thus makes very asymmetrical assumptions about the knowledge of principals and agents, largely neglecting the human capacity for interpersonal sense-making. This chapter explores the implications of instilling agency theory with a more realistic account of the human capacity to read other people’s desires, intentions, knowledge, and beliefs - that is, to have a theory of someone else’s mind.

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    KW - Principal-agent

    KW - Relations

    KW - Epistemic Assumptions

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    Linder S, Foss NJ, Stea D. Epistemics at Work: The Theory of Mind in Principal-Agent Relations. Frederiksberg: Copenhagen Business School [wp]. 2014 Feb.