Principal-agent problem and policy process, Public Economics

Assignment Help:

As you know, the principal-agent problem stress the effect of asymmetric information between the principal and the agents on economic outcomes, the equilibrium in a principal-agent relation, under incomplete information can be characterized by the inefficiency relative to a situation of full information. Note that this inefficiency does not in itself signify the effect of special interest groups on policy process and the outcome.

While comparing a standard complete information social planner with the real world policy process, we must compare both of them on the same environment of incomplete information. When we do this we find that delegation of decisions under imperfect information can have significant implications only if Principal and agent do not have identical preferences. Otherwise i.e., when they have identical preferences there will be no problem of mechanism and process design. In policy process the great majority of relationships involve asymmetric information. The paradigm which public economics follows, takes the social planner as maximizing the welfare of the representation individual or of a weighted sum of individuals of different preferences where weights are predetermined. Hence this paradigm assumes no problem of agency. The key factor is the heterogeneity which gives rise to the agency problem, and makes the principal-agent paradigm relevant.


Related Discussions:- Principal-agent problem and policy process

#title.public debt.., what is public debt. ? give complate information on p...

what is public debt. ? give complate information on public debt. ?

Pollution expenditure accounting, Normal 0 false false fals...

Normal 0 false false false EN-IN X-NONE X-NONE MicrosoftInternetExplorer4

Introduction of performance-related pay, Question: Awards for excellent...

Question: Awards for excellent performance are increasingly employed within the public service in many countries. These will or will not have a financial value. Performance-rel

Nations of the commonwealth, The international monetary fund and the World ...

The international monetary fund and the World Bank are the main lending financial institutions that give assistance to developing nations in the restoration of their economy. Wh

The myth of public goods by mark davis, summarize the basic tents of the ar...

summarize the basic tents of the argumentsin this case

Communicating with publics, When Neff says that "the very essence of public...

When Neff says that "the very essence of public relations is grounded in communication" (2010 p.373) she goes on to point to two features of communication that should aid us in ana

Importance of heterogeneity, Q. Importance of heterogeneity? The import...

Q. Importance of heterogeneity? The importance of heterogeneity for public policy process can be summarized in two propositions. - Heterogeneity or conflict of interests is

Healthy economic, 1.Suppose you are interested in assessing the value of a ...

1.Suppose you are interested in assessing the value of a statistical life for individuals. You ?nd a dataset on risk and wages. You consider running the following OLS regression.

Condition of pareto optimality , reallocation of the resources from 1 effic...

reallocation of the resources from 1 efficient point to another efficient point that cause the production of x increase and production of y decrease hold the condition of contrect

Write Your Message!

Captcha
Free Assignment Quote

Assured A++ Grade

Get guaranteed satisfaction & time on delivery in every assignment order you paid with us! We ensure premium quality solution document along with free turntin report!

All rights reserved! Copyrights ©2019-2020 ExpertsMind IT Educational Pvt Ltd