Abstract
Agency theory can be viewed as a special branch of the theory of incomplete contracts. Whenever one person is authorized to act on behalf of another, they are in an agency relationship: a special type of (implicit or explicit) contractual relationship wherein the latter is the principal and the former the agent. The agency relationship becomes interesting when there is information asymmetry between the principal and agent and monitoring actions or information is costly, so that perfect contracts cannot be written. Because of the pervasiveness of these conditions, agency theory can be used to examine a wide range of incentive problems in organizations and their solutions.
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Seth, A. (2018). Agency Theory. In: Augier, M., Teece, D.J. (eds) The Palgrave Encyclopedia of Strategic Management. Palgrave Macmillan, London. https://doi.org/10.1057/978-1-137-00772-8_570
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DOI: https://doi.org/10.1057/978-1-137-00772-8_570
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