Biased principals as a discipline device

Mathias Dewatripont*, Jean Tirole

*Corresponding author for this work

    Research output: Contribution to journalArticlepeer-review

    6 Scopus citations


    This paper rationalizes the existence of multiple, biased principals as a discipline device that induces agents to expend effort. Specifically, principals are given incentives that induce them to take actions that reward (punish) agents after good (bad) performance. This framework is illustrated in the case of corporations, which rely on equity-holders and debtholders to keep management in check, and in the case of multiministry oversight of state-owned firms.

    Original languageEnglish (US)
    Pages (from-to)195-206
    Number of pages12
    JournalJapan and the World Economy
    Issue number2
    StatePublished - Jun 1996


    • Budget constraints
    • Debt
    • Equity
    • Multiple principals

    ASJC Scopus subject areas

    • Finance
    • Economics and Econometrics
    • Political Science and International Relations


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