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Agency Theory: Choice-Based Foundations of the Parametrized Distribution Formulation

Edi Kami
Economic Theory
Vol. 36, No. 3 (Sep., 2008), pp. 337-351
Published by: Springer
Stable URL: http://www.jstor.org/stable/40282913
Page Count: 15
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Agency Theory: Choice-Based Foundations of the Parametrized Distribution Formulation
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Abstract

This paper develops choice- theoretic foundations of the principal's and the agent's behaviors underlying the parametrized distribution formulation of agency theory. Both the principal and the agent are expected-utility maximizers and their action-dependent subjective probabilities are defined directly on the outcomes. The results are used to evaluate and interpret the common prior assumption.

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