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Fairness in Delegated Bargaining
Author(s) -
Lammers Frauke
Publication year - 2010
Publication title -
journal of economics and management strategy
Language(s) - English
Resource type - Journals
SCImago Journal Rank - 1.672
H-Index - 68
eISSN - 1530-9134
pISSN - 1058-6407
DOI - 10.1111/j.1530-9134.2009.00249.x
Subject(s) - principal (computer security) , negotiation , business , third party , law and economics , principal–agent problem , economics , microeconomics , law , computer science , political science , computer security , finance , internet privacy , corporate governance
This article examines whether a principal prefers to hire a fair or a selfish agent. A fair agent cares to some extent for the well‐being of other people and thus he also cares for the principal. Therefore, if the agent performs individual work, the principal is always better off to hire a fair agent. However, we show that when a third party with conflicting interests is introduced, it may be advantageous for the principal to hire a selfish agent. The reason is that the selfish agent will be a tough bargainer not only when negotiating his employment contract with the principal but also when dealing with the third party, for example, when selling the principal's product to a buyer.