Why Doesn't the Principal Help the Agent?

32 Pages Posted: 31 Jan 2010

Date Written: January 10, 2010

Abstract

This paper endogenizes the strategic relationship between a principal (a player with authority) and an agent (a player without authority), and shows that a submissive relationship is the unique equilibrium outcome. That is, the agent voluntarily chooses a task that will increase the principal's payoffs, but the principal does not help the agent in the same way. Instead, the principal chooses a task that will decrease the agent's payoffs. This paper also endogenizes the (Stackelberg) leadership, and shows that delegation of leadership with a submissive relationship is optimal.

Keywords: Authority, Leadership, Strategic Relationship

JEL Classification: D82, D74, G30

Suggested Citation

Kwon, Illoong, Why Doesn't the Principal Help the Agent? (January 10, 2010). Available at SSRN: https://ssrn.com/abstract=1544550 or http://dx.doi.org/10.2139/ssrn.1544550

Illoong Kwon (Contact Author)

Seoul National University ( email )

Graduate School of Public Administration
599 Gwanak-ro
Gwanak-gu, Seoul 151-742
Korea, Republic of (South Korea)
82-2-880-8551 (Phone)
82-2-877-2411 (Fax)

HOME PAGE: http://www.albany.edu/~ik325357/

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