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.
- Budget constraints
- Multiple principals
ASJC Scopus subject areas
- Economics and Econometrics
- Political Science and International Relations