The Palgrave Encyclopedia of Strategic Management

Living Edition
| Editors: Mie Augier, David J. Teece

Agency Problems

Living reference work entry


Agency problems arise from incomplete and asymmetric information as principals attempt to motivate agents to act in their interest. Incomplete and asymmetric information, conflicting incentives and imperfect monitoring can result in outcomes undesirable for the principal. The key to mitigating such problems is in the efficient design of incentive systems, broadly defined. Agency problems in business relationships are pervasive both within and between organizations and arise in relationships between employers and employees, shareholders and managers, and buyers and suppliers.


Moral Hazard Asymmetric Information Adverse Selection Agency Problem Initial Public Offering 
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Authors and Affiliations

  1. 1.One Brookings DriveOlin Business SchoolSt LouisUSA