Rational Choice Perspectives on Bureaucracy

Formal models of bureaucracy have attracted significant attention as a systematic body of theory in the past decades. Scholars in this tradition examine institutions and organizations, uncovering incentives that can explain and help to design governance. Scholars in the rational choice tradition study the relationship between politicians and bureaucrats as an incomplete contracting problem between a political principal and a bureaucratic agent. When elected representatives delegate policymaking authority to an administrative agency, they face hidden action problems when the agency takes unobservable actions, and hidden information problems when there are things about agency policy preferences that representatives cannot easily learn. A wide variety of bureaucratic policymaking problems can be modeled as variations on these information problems. Formal theorists have considered resources and discretionary authority as variables that can be optimized to mitigate agency problems, and the models have both positive and normative implications.

On Fixing International Cricket Matches

Corruption is hidden action which distorts allocations of resources away from competitive outcomes. Hence the detection of such actions is both difficult yet important. In many economic contexts, agent actions are unobservable by principals and hence detection is difficult; sport offers a well-measured context in which individual actions are documented in great detail. In recent years the sport of cricket, which records a huge volume of statistics, has been beset by a number of corruption scandals surrounding the fixing of matches. We use 18 one day international (ODI) matches that are known to be fixed by one of the teams involved and analyse a wide range of observed statistics from all ODI matches since 1971, in order to determine whether corruption manifests itself in recorded outcomes. We find that corruption does affect a number of observed outcomes in anticipated ways, suggesting that both the increased reporting of statistics, and the statistical analysis of them may be a useful tool in detecting corruption.

Support of the Afghan Resistance Movement by the Administration of US President J. Carter (1978–1980)

The aim of the article is to investigate, on the basis of American sources, the forms and means of support provided by the United States of America (both unilateral and mediated by the Allies) to the Afghan Resistance Movement in 1978–1980, as well as the factors that influenced the nature of that support. At the core of the research methodology is the method of a content analysis of historical sources, problem-chronological, typological and comparative methods. Main results and conclusions. The US support for the Afghan opposition from 1978 to 1980 in the USSR was exaggerated and became only an excuse used to justify the Soviet intervention in the Democratic Republic of Afghanistan. From April 1978 to December 1979, Carter Administration limited itself to an information campaign and to providing non-military assistance to the Afghan insurgents. This support included medicines, food rations, communications equipment, etc. It was not until the early 1980s that the United States developed the Hidden Action Program with a budget of $ 30 million which provided the Mujahideen with Soviet-made small arms, anti-tank and anti-aircraft weapons. Pakistan, Saudi Arabia, China and Egypt had been involved in the implementation of the Program. However, the volume of military assistance as well as the quality of the weapons could not significantly increase the Mujahideen’s combat capability. The military and technical superiority of the Soviet and Afghan troops remained significant. The US politicians, analysts as well as the Mujahideen field commanders noted insufficiency and lack and effectiveness of the US aid. However, the Carter Administration had managed to forge contacts with the Afghan opposition, to form a coalition of states around the Hidden Action Program, to develop and test ways to acquire weapons and their delivery routes to Pakistan and beyond to Afghanistan. This experience would later be taken into account and used by the R. Reagan Administration. In addition, the US support had a positive effect on the moral and psychological state of the Afghan insurgents. Practical significance. The main conclusions and factual material can be used to study the Afghan crisis as part of the Cold War. Originality. The US policy regarding the Afghan Resistance Movement is examined against the backdrop of deteriorating Soviet-American relations in connection with the Soviet intervention in Afghanistan. Scientific novelty. The ways and forms of the US support for the Afghan Resistance Movement at the initial stage of the Afghan crisis are specified for the first time. Type of article: descriptive.

Seller Reviews and Consumers' Perceptions of Trust, Risks, and Uncertainty

Based on the principal-agent theory, the authors posit that seller-related uncertainty is derived from buyer (the principal) fears of hidden information (information asymmetry) and hidden action (seller opportunism) on the part of sellers (the agents). The study evaluates the effects of the three antecedents of trust in the seller reviews context with a quasi-experiment. The authors enhance the validity of the research manipulation through a unique approach of creating reviews through a text mining process of actual seller reviews. This allows control over the content of reviews while retaining their realism. The findings validate that the principal-agent theory provides a good fit for understanding seller-related uncertainty in e-commerce transactions. Second, buyers appear to be more concerned about seller opportunism than with information asymmetry. Third, while assessments of integrity and competence of the vendor, assessed through reviews, play a role, benevolence does not.

Motivation, Human Capital Investment and Compensation in an Agency Problem

This paper considers a firm's optimal investment in training and motivation measures in a hidden action agency problem. We study how these strategies interact with each other and the contract in order to create value for the firm. Productivity enhancing training can be firm specific or non-firm specific and firm specific motivation can enhance utility or reduce effort cost. Whether these measures are complements or independents depends on the firm specificity of human capital and whether the participation constraint is binding. We characterize how a tighter labor market affects marginal profitabilities and examine the relative benefits of motivation measures which enhance utility versus those which decrease effort cost.