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 Publicationwww
    PublisherSSRN: Social Science Research Network
    Number of pages28
    DOIs
    Publication statusPublished - 24 Feb 2014

    Cite this

    Linder, Stefan ; Foss, Nicolai Juul ; Stea, Diego. / Epistemics at Work : The Theory of Mind in Principal-Agent Relations. www : SSRN: Social Science Research Network, 2014.
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    Epistemics at Work : The Theory of Mind in Principal-Agent Relations. / Linder, Stefan; Foss, Nicolai Juul; Stea, Diego.

    www : SSRN: Social Science Research Network, 2014.

    Research output: Working paperResearch

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