Theory and Decision

, Volume 74, Issue 2, pp 219–239

The irreversibility effect and agency conflicts

  • Clemens Löffler
  • Thomas Pfeiffer
  • Georg Schneider
Article

DOI: 10.1007/s11238-012-9331-6

Cite this article as:
Löffler, C., Pfeiffer, T. & Schneider, G. Theory Decis (2013) 74: 219. doi:10.1007/s11238-012-9331-6

Abstract

This paper studies the influence of agency conflicts on the irreversibility effect. Using a dynamic variant of the static Baron and Myerson (Econometrica 50(4):911–930, 1982) adverse selection model, we characterize under which circumstances the irreversibility effect arises in the presence and absence of an agency conflict. In particular, we find that in the presence of an agency conflict the irreversibility effect arises in more circumstances than in the standard first-best analysis that abstracts from agency problems.

Keywords

Irreversibility effectIrreversible decisionsUncertaintyAgency conflicts

Copyright information

© Springer Science+Business Media New York 2012

Authors and Affiliations

  • Clemens Löffler
    • 1
  • Thomas Pfeiffer
    • 1
  • Georg Schneider
    • 2
  1. 1.Department of Business AdministrationUniversity of ViennaViennaAustria
  2. 2.Department of Taxation, Accounting and FinanceUniversity of PaderbornPaderbornGermany