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- Title
The Agency Dilemma: Information Asymmetry in the "Principal-Agent" Problem.
- Authors
Popović, Milena; Kuzmanović, Marija; Gušavac, Bisera Andrić
- Abstract
By possessing incomplete and imperfect information, market participants do not achieve the optimal allocation of resources that would be possible in the case of possessing complete information. On the other hand, timely and relevant information represents a product for which the appropriate market price must be paid. In modern corporations, the two sides engaged in a contract may have different goals and have different levels of information. This problem is called the "principal-agent" problem. Agents sometimes have personal goals that do not coincide with the goals of the principal, thus the principal must achieve its own, but also the needs of agents. One way is to motivate the agent using rewards, prohibitions and penalties. In this case, the qualitative needs assessment and evaluation of costs results in greater efficiency and faster problem solving. The paper points out the importance of economics of information for the operation and the result of market processes. To model market relations in a situation where two parties are asymmetrically informed, the methodology of game theory is used. The problem of " principal-agent " is modelled as the Bayesian game, where the solution is obtained using the concept of the Bayes-Nash equilibrium.
- Subjects
ENTERPRISE resource planning; RESOURCE allocation; INFORMATION resources management; INFORMATION resources &; economics; MARKET pricing; NASH equilibrium
- Publication
Management (1820-0222), 2012, Vol 17, Issue 62, p11
- ISSN
1820-0222
- Publication type
Article
- DOI
10.7595/management.fon.2011.0005