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IS AGENCY THEORY SELF‐ACTIVATING?
Author(s) -
ARCE DANIEL G.
Publication year - 2007
Publication title -
economic inquiry
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 0.823
H-Index - 72
eISSN - 1465-7295
pISSN - 0095-2583
DOI - 10.1111/j.1465-7295.2007.00047.x
Subject(s) - agency (philosophy) , autonomy , principal–agent problem , microeconomics , economics , principal (computer security) , preference , population , computer science , sociology , political science , management , corporate governance , social science , demography , law , operating system
This article examines the conditions under which the principal‐agent model is self‐activating/socially causal. We do so by exploring a principal‐agent framework that allows for the possibility that rational agents may hold intrinsic preferences for autonomy in decision making and experience disutility from being monitored. Using a dynamic model of preference formation, we identify conditions under which the principal‐agent model is self‐activating in that, over time, the introduction of the model in an otherwise efficient monitor‐worker relationship leads to the inefficient adoption of the agency model. We also examine the extent to which the agency model is robust when autonomy‐preferring agents are introduced into the population. ( JEL G30, L20, C72)