MHR 721 Lecture Notes - Lecture 6: Comparative Advantage, Absolute Advantage, Collegehumor
24 Oct 2016
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3. 7 the tension between principals and agents. The goal: reaping the full benefits of hiring an agent. Constantly delegate authority to others so that they may act in our place. In the real world agents always have interests of their own. Effective negotiation requires a good understanding of the benefits and risks of the agency relationship and how it can best be managed. Economic principle of comparative advantage having specialized knowledge in issue. Bringing an agent into a negotiation introduces a third tension. Costs in terms of money and time and time spent by principal in compliance or surveillance ensuring that the agent is not exploiting them . Tension the agent"s interests may or may not align with those of the principal. Different preferences agents want maximum fee and maintain relationships with other agents, banks clients and reputation since they are a repeat player.
