Principal (commercial law)

About: Principal (commercial law) is a research topic. Over the lifetime, 1579 publications have been published within this topic receiving 35379 citations. The topic is also known as: Principal (commercial law).

The Power of Legitimacy and the Legitimacy of Power: International Law in an Age of Power Disequilibrium

Abstract: The American Society of International Law (ASIL), incorporated by Act of Congress in 1950, was founded in 1906 “to promote the establishment and maintenance of international relations on the basis of law and justice.” As we celebrate the centennial of this, the Society’s principal publication, it is appropriate to examine the present and future prospects of this project. Is it still a compelling aspiration in the era of U.S. superpower-dom? The founding of the Society and initiation of the Journal (AJIL) must be seen in the context of the then-prevalent American commitment to the idea that a world of international law and international tribunals would be a natural, even historically inevitable, extrapolation of a good American idea. Speaking in 1890 to the first Pan-American Conference, President Benjamin Harrison congratulated the delegates on formulating a hemispheric arbitration agreement. “We rejoice,” he said, “that you have found in the organization of our Government something suggestive and worthy of imitation.” At The Hague in 1907, Secretary of State Elihu Root, the founding president of the ASIL, called for the creation of an international court “which would pass upon questions between nations with the same impartial and impersonal judgment that the Supreme Court of the United States gives to questions arising between citizens of the different States.”

Contract renegotiation and options in agency problems

Abstract: This article discusses the ability of an agent and a principal to achieve the first-best outcome when the agent invests in an asset that has greater value if owned by the principal than by the agent. When contracts can be renegotiated, a well-known danger is that the principal can hold up the agent, undermining the agent's investment incentives. We begin by identifying a countervailing effect: Investment by the agent can increase his value for the asset, thus improving his bargaining position in renegotiation. We show that option contracts will achieve the first best whenever his threat-point effect dominates the holdup effect. Otherwise, achieving the first best is difficult and, in many cases, impossible. Copyright 2000 by Oxford University Press.

Information Control in the Principal-Agent Problem

Abstract: This paper compares the principal's payoff in agency models under different assumptions about the agent's access to information. The agent may make decisions before (is uninformed) or after (is informed) learning the state of nature. When there are two possible outcomes, the principal typically prefers informed to uninformed agents, whether the agent receives the information before or after contracting. This result is false when there are more than two outcomes. Conditions under which a principal prefers one agent to another, when the agents differ only in their disutility of effort, are also given. Copyright 1993 by Economics Department of the University of Pennsylvania and the Osaka University Institute of Social and Economic Research Association.

Delegation and incentives

Abstract: This article analyzes the relation between authority and incentives. It extends the standard principal-agent model by a project selection stage in which the principal can either delegate the choice of project to the agent or keep the authority. The agent’s subsequent choice of effort depends both on monetary incentives and the selected project. We find that the consideration of effort incentives makes the principal less likely to delegate the authority over projects to the agent. In fact, if the agent is protected by limited liability, delegation is never optimal.

The Incentive Effects of Flat-Fee and Percentage Commissions for Real Estate Brokers

Abstract: This paper analyzes the incentive affects of flat-fee and percentage commission systems from the perspective of the economic theory of agency. Under a plausible set of assumptions the systems provide equivalent incentives. However, the relative desirability of the two systems depends upon the pricing strategy employed and factors specific to the individual. In general, neither system perfectly aligns the interests of the agent with those of the property-owner. A surprising result of the analysis is that the optimal listing price when an agent is employed may be below the first-best price. The first-best price, or residual maximizing solution to the principal-agent problem from the perspective of the property-owner, is the solution that would occur if the agent's interests were perfectly aligned with those of the principal. This study suggests that the use of a percentage versus a flat-fee commission may be due to information costs rather than price discrimination on the part of brokers.