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I-deal or No I-deal? Lessons for Managers from Economic Theory

In: Idiosyncratic Deals at Work

Author

Listed:
  • Priyanka Sharma

    (Illinois Institute of Technology)

  • Smriti Anand

    (Illinois Institute of Technology)

  • Liad Wagman

    (Illinois Institute of Technology)

  • Pouya Haddadian Nekah

    (Illinois Institute of Technology)

Abstract

We explore the interface of idiosyncratic work arrangements (i-deals) and economic theory on private information. To that end, we model i-deals as informal supervisor-employee agreements and use the principal-agent framework from economics to form linkages between the two literatures. We first highlight that supervisor-employee interactions tend to be rife with information asymmetries, where one party may possess some information that the other party does not. Next, we link the economic concepts of adverse selection and moral hazard to i-deals, pointing out the potential negative effects of information asymmetries on supervisor-employee interactions. Lastly, we introduce two market mechanisms from economics, namely signaling and screening, that can be useful in overcoming the issues surrounding information asymmetries and emphasize their applicability to i-deals. The discussion illustrates informational reasons that may drive managers to reject i-deal arrangements, as well as potential solutions.

Suggested Citation

  • Priyanka Sharma & Smriti Anand & Liad Wagman & Pouya Haddadian Nekah, 2022. "I-deal or No I-deal? Lessons for Managers from Economic Theory," Springer Books, in: Smriti Anand & Yasin Rofcanin (ed.), Idiosyncratic Deals at Work, chapter 0, pages 45-70, Springer.
    • Handle: RePEc:spr:sprchp:978-3-030-88516-8_3
    DOI: 10.1007/978-3-030-88516-8_3
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