On the Role of Commitment in a Principal–Agent Relationship with an Informed Principal

1996 ◽  
Vol 68 (2) ◽  
pp. 510-530 ◽  
Author(s):  
Peter-Jürgen Jost
Keyword(s):  
Principal Agent ◽  
Informed Principal ◽  
Principal Agent Relationship

Stakeholder Information Flow From Horse Entrepreneurs to Customers

2020 ◽  
pp. 274-288
Author(s):  
Heli I. Koskinen ◽  
Rauno Rusko
Keyword(s):  
Infectious Diseases ◽  
Information Flow ◽  
Stakeholder Management ◽  
Stakeholder Analysis ◽  
Principal Agent ◽  
A Chain ◽  
Equine Industry ◽  
Instrumental Role ◽  
Principal Agent Relationship

This study focuses on emphasizing the instrumental role of stakeholder analysis and the concept of business ecosystem. Specifically, a stakeholder relationship might provide the channel for the particular instrumental targets of a business subset. This kind of stakeholder management is based on a principal-agent relationship between industry actors. However, this example, which focuses on horse entrepreneurs and the infectious diseases of this subset of the equine industry, shows that instead of a simple principal-agent relationship, stakeholder management might yield a chain of principal-agent relationships in the form of a principal-agent/principal-agent relationship (for example, one or more of the stakeholders simultaneously takes on the role of both agent and principal). According to the analysis, horse entrepreneurs have this kind of double role in stakeholder management for the prevention of infectious diseases.

scholarly journals Auditing versus monitoring and the role of commitment

2021 ◽  
Author(s):  
Peter-J. Jost
Keyword(s):  
Moral Hazard ◽  
Principal Agent ◽  
Noisy Signal ◽  
Additional Information ◽  
Ex Ante ◽  
Effort Choice ◽  
High Effort ◽  
Principal Agent Relationship

AbstractThis paper studies the effect of timing and commitment of verification in a principal-agent relationship with moral hazard. To acquire additional information about the agent’s behavior, the principal possesses a costly technology that produces a noisy signal about the agent’s effort choice. The precision of this signal is affected by the principal’s verification effort. Two verification procedures are discussed: monitoring where the principal verifies the agent’s behavior simultaneously with his effort choice and auditing where the principal can condition her verification effort on the realized outcome. As it is well known, the principal prefers to audit the agent’s behavior if she can commit to her verification effort at the time of contracting. The main contribution of this paper is to highlight the importance of commitment by the principal to her verification effort. In particular, I show that, when the principal cannot commit to her verification effort ex-ante, the principal strictly prefers monitoring to auditing if the gains from choosing high effort are sufficiently high.

scholarly journals Endogenous Verifiability and Relational Contracting

2009 ◽  
Vol 99 (5) ◽  
pp. 2193-2208 ◽  
Author(s):  
Ola Kvaløy ◽  
Trond E. Olsen
Keyword(s):  
Principal Agent ◽  
Relational Contracting ◽  
Strong Assumption ◽  
Repeated Interaction ◽  
Ex Ante ◽  
Contractual Incompleteness ◽  
The Relationship ◽  
Principal Agent Relationship

Principal-agent models usually invoke the strong assumption that the parties know for sure ex ante whether a variable is verifiable or not. This paper assumes that only the probability of verification is known, and that this probability is endogenously determined. We analyze a principal-agent relationship where the verifiability of the agent's output is determined by the principal's investment in drafting an explicit contract. The model is well suited for analyzing the relationship between explicit contracting, legal courts, trust, and relational contracting. In particular, we show how trust—established through repeated interaction—and legal courts may induce contractual incompleteness. (JEL D82, D86)

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