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Multi-criteria agency theory

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  • Vetschera, Rudolf

Abstract

This paper extends standard agency theoretic models to explicitly take into account the presence of multiple criteria at the agent level. Two possible approaches for this extension are discussed. In the first approach, we consider only the minimum information that the principal might posses about the agent's preferences towards different criteria. It can be shown that, in this context, the principal has only weak possibilities to influence the agent's behavior. In a second approach, a richer information set is considered. In this context, it is possible to determine probabilities of alternatives being selected by the agent. We also analyze how these probabilities can be influenced by the principal, and how this affects the principal's net profit.

Suggested Citation

  • Vetschera, Rudolf, 1996. "Multi-criteria agency theory," Discussion Papers, Series I 280, University of Konstanz, Department of Economics.
    • Handle: RePEc:zbw:kondp1:280
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    References listed on IDEAS

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