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Commentary: Minimizing Agency Costs: Toward a Testable Theory
Commentary: Minimizing agency costs: Toward a testable theory
Gordon M.Kaufman

When an agent must negotiate for multiple principals with another agent who also represents multiple principals, what principles should guide the choice of the agents' mandates? What is the effect on agency costs? What is the probability of striking a deal acceptable to all parties? Do these principles lead to an “optimal” mandate? What lessons do we learn by “backing up” and examining the implications of a prescriptive framework of assumptions about “reasonable” criteria that a mandate must obey? For example, do we better understand conditions under which a “tight” mandate is preferred to a “loose” mandate? Do operationally meaningful “rules of thumb” emerge? In short, if I am ...

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