Principal-agent Approach Research Articles

Studying the influence of national parliaments in EU affairs: reconnecting empirical research and the Principal-Agent approach

ABSTRACT The literature on national parliaments and the EU has built up its knowledge on the strength and activities of domestic parliaments in the European Union. While these studies were of outmost importance to understand how and why parliaments and MPs act on EU affairs, we still know little on the influence of domestic parliaments on the EU policy of their executive and on EU policy-making more generally. The article first presents the current gaps in knowledge as well as the challenges to study the influence of parliaments in EU affairs and ends by presenting a research strategy which advocates ‘reconnecting’ empirical works on national parliaments and the EU with the Principal-Agent model. This research agenda could foster new theoretical and empirical studies with important implications for the debate on the (re)parliamentarisation of the European Union as well as on EU negotiations.

Society, Politicians, Climate Change and Central Banks: An Index of Green Activism

This paper proposes an index for evaluating central bank activism in addressing climate-change issues. Consistent with a principal-agent approach, this metric assumes that the central bank’s sensibility on climate change depends on both economic and political drivers. The index has been created to include not only actual policies but also participation in green networks and initiatives that signal central bank activism on climate change.

A PRINCIPAL–AGENT APPROACH TO CAPACITY REMUNERATION MECHANISMS

We propose to study electricity capacity remuneration mechanism design through a principal–agent approach. The principal represents the aggregation of electricity consumers (or a representative entity), subject to the physical risk of shortage, and the agent represents the electricity capacity owners, who invest in capacity and produce electricity to satisfy the demand of consumers, and are subject to financial risks. Following the methodology of [J. Cvitanić, D. Possamaï & N. Touzi (2018) Dynamic programming approach to principal–agent problems, Finance and Stochastics 22(1), 1–37], we propose an optimal contract, from the perspective of consumers, which complements the revenue capacity owners achieved from the spot energy market, and incentivizes both parties to perform an optimal level of investment while sharing the physical and financial risks. Numerical results provide insights on the necessity of a capacity remuneration mechanism and also show how this is especially true when the level of uncertainties on demand or production side increases.

Optimal make–take fees for market making regulation

AbstractWe address the mechanism design problem of an exchange setting suitable make– take fees to attract liquidity on its platform. Using a principal–agent approach, we provide the optimal compensation scheme of a market maker in quasi‐explicit form. This contract depends essentially on the market maker inventory trajectory and on the volatility of the asset. We also provide the optimal quotes that should be displayed by the market maker. The simplicity of our formulas allows us to analyze in details the effects of optimal contracting with an exchange, compared to a situation without contract. We show in particular that it improves liquidity and reduces trading costs for investors. We extend our study to an oligopoly of symmetric exchanges and we study the impact of such common agency policy on the system.

Mapping ideological diversity from inside parties: A principal-agent approach

This article develops a framework to explain ideological diversity within political parties in parliamentary democracies from the positions of individual legislators. First, I review the different theories explaining the variation of ideological diversity within political parties in the field of party politics and legislative studies. Then, I propose to model the relations between legislators, their party and their constituents as a competitive delegation process building on the principal-agent theory. I draw on the literature on the distribution of power within political parties to argue that intra-party ideological diversity can best be explained by vertical bargains taking place between the different territorial layers of political parties.

What is a scientific article? A principal-agent explanation.

What is a scientific article? This paper proposes that the scientific article can be understood the main unit in a piece-rate system that solves research patrons' problems of fairly evaluating and paying scientists. It is a solution for the evaluation of science given information asymmetries between lay people and scientists. To elucidate a definition in keeping with the principal-agent approach, this paper extends both former explanations of the research article and proposals of publications as attestations to science patrons.

Strategic and Organisational fit in Corporate News Markets: A Principal-agent Approach to Studying Newspaper Mergers

ABSTRACT This article analyses strategic and organisational fit in corporate newspaper mergers in the context of the digitalisation of local newspaper markets. Using the 2019 acquisition of Nordsjø Media by Amedia in Norway as case, we analyse how eight editors-in-chief perceive the process of incorporating small, low-frequency, print-oriented monopolistic newspapers into one of Scandinavia’s largest newspaper chains. The semi-structured interviews were analysed in light of perceived strategic and organisational fit in a principal-agent theoretical framework, the aim of which is to shed light on corporate ownership effects in consolidated newspaper markets. The analysis reveals the precarity of independent ownership in digitising news markets, to which corporatisation emerges as a necessary and welcomed solution. We find the strategic fit as perceived by editors to be tied to technological resources and scale economics, while organisational fit is hampered by the speed and pressure of corporatisation processes. While these results largely support findings from previous acquisition studies in the news industries, the contribution of this analysis lies primarily with the necessity of scale required by the technological transformation that forces independent newspapers to submit to larger chain operations and how it influences considerations of fit in disruptive digital news markets.

Lack of incentives for the development of innovative antibiotics-analysis of market and time constraints

Currently, it is becoming alarmingly clear that pharmaceutical companies are continuously withdrawing from antibiotics research and that there is now amarket failure. The future decline in the gross domestic product alone is now estimated in the trillions of US dollars. The predicted number of people who could die in 30years from resistant germs is an urgent call for action. This paper aims to examine the situation on the basis of possible forms of organization and with the help of individual ideas of the principal-agent approach, atheory from economics that can be used to analyze problems between the principal and agent. The result demonstrates the urgent need for action by the state. The longer the alarming proportions of this development is not fully taken into account in the political decision-making process, the more drastic state measures and fewer available options for action there will be at alater point in time.

Does Regulation Really Work? A Principal-agent Approach to the Portuguese Waste Services

Does Regulation Really Work? A Principal-agent Approach to the Portuguese Waste Services

TEORI AGENCY DALAM PEMIKIRAN ORGANISASI ; PENDEKATAN POSITIVIST DAN PRINCIPLE-AGEN

Agency Theory Has Been used by researchers in accounting, economics, finance, marketing, political science, organizational behavior, and sociology. However, this theory is still surrounded by controversy. The Purpose Of This study is to describe the contribution of agency theory to organizations with a positivist and principal-agent approach. This research method uses literature studies. The results of this study are agency theory giving two contributions specifically to organizational thinking. The first is the treatment of information. Organizations can intervene in information systems with the aim of controlling agent opportunism. The second is the risk implication. The organization is assumed to have uncertainty in the future. Results uncertainty combined with differences in willingness to accept risk will affect the contract between the principal and the agent. The idea of agency theory of risk, outcome uncertainty, incentives, and information systems is a new contribution to organizational thinking, and empirical evidence supports theory, especially when associated with complementary theoretical perspectives

TEORI AGENCY DALAM PEMIKIRAN ORGANISASI ; PENDEKATAN POSITIVIST DAN PRINCIPLE-AGEN

Agency theory has been used by researchers in accounting, economics, finance, marketing, political science, organizational behavior, and sociology. However, this theory is still surrounded by controversy. The purpose of this study is to describe the contribution of agency theory to organizations with a positivist and principalagent approach. This research method uses literature studies. The results of this study are agency theory giving two contributions specifically to organizational thinking. The first is the treatment of information. Organizations can intervene in information systems with the aim of controlling agent opportunism. The second is the risk implication. The organization is assumed to have uncertainty in the future. Results uncertainty combined with differences in willingness to accept risk will affect the contract between the principal and the agent. The idea of agency theory of risk, outcome uncertainty, incentives, and information systems is a new contribution to organizational thinking, and empirical evidence supports theory, especially when associated with complementary theoretical perspectives

Managing Uncertainty in Implementation Times of Competitively-Procured Transmission via Risk-Sharing and Winner Selection Functions

We develop a MILP framework to design risk-sharing and winner-selection mechanisms, applying a principal-agent approach to competitive bidding processes to select transmission agents, with attention to cases where uncertainties in implementation times of transmission facilities are an issue and regulators must deal with uncertain information regarding efficiency and risk-aversion of possible competitors. Conclusions are drawn with aid of case studies.

Responsive Regulation on Disruptive Technology: A Continuous-Time Principal-Agent Approach

Early deployment of automated vehicles (AVs) may likely cause a loss of efficiency of the transportation system. However, after there are a sufficient number of such vehicles in the traffic stream, many benefits can be realized. It thus appears sensible to provide subsidies to promote the early adoption of AVs and shorten the transition period. This paper investigates an optimal subsidy policy that accelerates the deployment of AVs from lower to higher market penetration rates. The policy can maximize the government agency's expected total utility because of the AV deployment. The main contribution is a dynamic games approach that considers the uncertainty in the market forecast and the information asymmetry between the government agency and the subsidized entities.

Will REDD+ Safeguards Mitigate Corruption? Qualitative Evidence from Southeast Asia

High levels of faith and finance are being invested in REDD+ as a promising global climate change mitigation policy. Since its inception in 2007, corruption has been viewed as a potential impediment to the achievement of REDD+ goals, partly motivating ‘safeguards’ rolled out as part of national REDD+ readiness activities. We compare corruption mitigation measures adopted as part of REDD+ safeguards, drawing on qualitative case evidence from three Southeast Asian countries that have recently piloted the scheme: Indonesia, the Philippines, and Vietnam. We find that while REDD+ safeguards adopt a conventional principal-agent approach to tackling corruption in the schemes, our case evidence confirms our theoretical expectation that REDD+ corruption risks are perceived to arise not only from principal-agent type problems: they are also linked to embedded pro-corruption social norms. This implies that REDD+ safeguards are likely to be at best partially effective against corruption, and at worst will not mitigate corruption at all.

Going beyond dyadic consultation relationships: information exchange in multi-step participation procedures

AbstractFor decades, political scientists have observed the diffusion of complex governance arrangements including public participation procedures to ameliorate the democratic deficit inherent in these often-opaque structures. This article asks how the information provided in consultation statements is used by the consulting actors. To account for the multi-step character, the article combines exchange theory with a principal-agent approach, acknowledging that several actors in a delegation chain might be interested in the provided information. We use a typical case of a multi-step procedure – participation in German grid development – to test both theories. Neither the private firms nor the regulator use information provided in their own consultations, contradicting exchange theory. But the regulator considers ecological submissions made in the firms’ consultation, as the principal-agent approach suggests. Thus, a principal-agent approach allows us to find influence of consultation statements that exchange theory cannot detect.

The Role of Royalties in Resource Extraction Contracts

The manner in which governments charge mineral resource producers has been the subject of considerable debate. Income-based charges such as resource rent taxes have been advocated on the theory that royalties and other output-based charges create inefficiency by distorting production decisions. Using a principal-agent approach to resource contracts, separating asset ownership from asset use, we demonstrate that royalties can be efficient under conditions of certainty and also when there is uncertainty and asymmetric information. Royalties serve a key pricing purpose, signaling the marginal impact of extraction on the residual value of reserves and surrounding land or sea.

El juez constitucional y la reelección presidencial en América Latina

Las disposiciones constitucionales sobre reelección presidencial se modificaron en varios países latinoamericanos durante los últimos años. En algunos países esos cambios pusieron en riesgo la existencia de la democracia. Este artículo utiliza el enfoque de principal-agente para analizar el papel del juez constitucional en la reelección presidencial como mecanismo de rendición de cuentas. Encuentra que la reelección inmediata en democracias de fuerte presidencialismo, puede ser un mecanismo perverso que agudiza la concentración del poder y deteriora el bienestar de los ciudadanos en vez de someter a los políticos a rendición de cuentas.

Incentives and Tournaments in Public Organizations

This essay discusses an integrative economic theory that reconciles rank-order tournaments with the traditional public administration concern for accountability in government. Recent reforms have concentrated on organizational designs that flow from piece-rate approaches to employee compensation and have ignored the incentive-compatibility aspects of traditional personnel systems. My claim is that promotion tournaments in public organization hierarchies are perhaps more efficient than the pay-for-performance systems often called for in traditional principal-agent approaches.

Unravelling the Puzzle of Social Standards’ Design in EU and US Trade Agreements

ABSTRACTThe European Union (EU) and the United States (US) are signing preferential trade agreements (PTAs) increasingly used as vehicles for exporting social regulation, such as labour and environmental standards. Despite the similarity in terms of the inclusion of such provisions, their design varies greatly between US and EU agreements. The US exports its domestic standards, relying on coercive enforcement, while the EU emphasises international rules and soft measures. Why do US PTAs have stricter social standards than those signed by the EU? Using the principal–agent approach to explain the domestic politics of social provisions in EU and US PTAs, I argue that greater insulation of trade executives from interest groups and legislators results in their ability to set the agreement agenda independently, in accordance with their normative preferences. The argument is supported by case studies and original interview data.

Optimal Make-Take Fees for Market Making Regulation

We consider an exchange who wishes to set suitable make-take fees to attract liquidity on its platform. Using a principal-agent approach, we are able to describe in quasi-explicit form the optimal contract to propose to a market maker. This contract depends essentially on the market maker inventory trajectory and on the volatility of the asset. We also provide the optimal quotes that should be displayed by the market maker. The simplicity of our formulas allows us to analyze in details the effects of optimal contracting with an exchange, compared to a situation without contract. We show in particular that it leads to higher quality liquidity and lower trading costs for investors.