Agency Costs and Transaction Costs: Flops in the Principal-Agent-Theory of Financial Markets

Author(s):  
Dieter Schneider
Author(s):  
Alex Neads

Abstract Military assistance is a perennial feature of international relations. Such programmes typically aim to improve the effectiveness of local partners, exporting the donor's way of war through the provision of training and equipment. By remaking indigenous armies in their own image, donors likewise hope to mitigate the profound agency costs associated with the transfer of military capability. But, while technical and organisational transformations can provide notable battlefield advantages, the philosophies underlying such innovations are not so easily propagated. Instead, new tactics, structures, and technologies typically intersect with pre-existing local schemata of war, producing novel if sometimes dysfunctional hybrid praxes. According to principal-agent theory, the application of greater conditionality in the provision of military assistance should improve the fidelity of military diffusion, aligning agents’ divergent interests with their principals’ goals. In practice, however, principal-agent exchanges rarely exist in isolation. Examining the modernisation of nineteenth-century Japan as a case study in military diffusion, this article argues that competition between rival patrons allows recipient states to play would-be principals off against each other, bypassing conditionality by replicating a marketplace for military assistance. In so doing, however, agents trade functionality for sovereignty in their military diffusion.


2021 ◽  
pp. 109634802098857
Author(s):  
Zvi Schwartz ◽  
Timothy Webb

Index scores and competitive sets (compsets) play a critical role in the performance and evaluation of hotels. The reliance on these metrics has drawn skepticism in recent years as competitive sets may be opportunistically chosen, creating bias in performance evaluation. Drawing from the principal–agent theory and the theory of incentives, we explore whether the distance of the competitors chosen for a hotel’s compset influences revenue per available room (RevPAR) index scores. Based on the concepts of resource similarity and market commonality, we develop a novel mathematical model through which we empirically analyze a large dataset of 10,000 compsets. We find evidence that competitor distance influences index performance and that this relationship is bidirectional. Results show that hotels that outperform the competition may use distance to inflate RevPAR indices, while those that underperform may use distance to further reduce scores. These conflicting results may be reflected from the reverse motivations of the stakeholders.


2016 ◽  
Vol 70 (2) ◽  
Author(s):  
Harald Wiese

AbstractEconomic principal-agent theory deals with asymmetric information. It has two aspects. (i) If one person is better informed than another one, the former may outwit the latter.


2014 ◽  
Vol 26 (11) ◽  
pp. 3381-3387
Author(s):  
Benjiang Ma ◽  
Hongwei Chen ◽  
Beiling Ma ◽  
Xiaohong Chen

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