Premium
How an ineffective agent can increase his budget
Author(s) -
Terai Kimiko,
Glazer Amihai
Publication year - 2021
Publication title -
economics and politics
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.822
H-Index - 45
eISSN - 1468-0343
pISSN - 0954-1985
DOI - 10.1111/ecpo.12162
Subject(s) - principal (computer security) , set (abstract data type) , principal–agent problem , work (physics) , budget constraint , computer science , business , microeconomics , economics , computer security , finance , engineering , programming language , mechanical engineering , corporate governance
A principal aware that an agent exerts little effort will nevertheless fund the agent, because the principal values the output the agent produces. The agent in turn decides how hard to work by anticipating how his behavior affects the budget the principal will give him. Under some conditions, the principal gives the agent large budgets anticipating that the agent will not work hard. The corrupt environment aggravates the problem. An agent who can set the budget ameliorates the problem, though incompletely.