Examples Of The Principal-Agent Model

Fred is working in a job that is stressful, he enjoys drinking a few beers after work, but, there are different states of emotions that occur during these events. We will look at Fred’s behaviors, feelings and the different conditions that is experienced, through a theory termed Opponent-process.

This paper will discuss the reasons why CEOs are not being overpaid. It will apply the utilitarian ethical principle to many a few aspects to CEO compensation and whether or not it is justifiable for such pay. The paper will look at whether or not their performance is justifiable for the pay because they play such a big role in the livelihood of the company along with the principle agency theory and how it is being addressed for the benefit of the shareholders and others involved with the company, the supply and demand of the CEOs, and the paper will describe the comparison of other professions to help link the idea of CEOs being fairly compensated.

Serious issues with incentives also include employees telling their superiors that everything is under control when it isn?t, just to save their bonus. Kohn then states that ?There are very few things that threaten an organisation as much as a hoard of incentive driven individuals trying to curry favour with the incentive dispenser? (1993, p.56).

Henderson printing is a mid-level company. The company operates some compensation models for its personnel. Through these models, the employees receive rewards for the labour they render to the enterprise. Henderson printing pays its employees by giving them regular salaries for their services. These are direct payments for the work they do in this company. Secondly, the employees are given pay raises even though this depends on the employee’s initiative to ask for a pay rise from the owner (Davis, 2013). Lastly, the employees are also accorded some merit bonuses every Christmas time. The merit bonuses are based on their contribution to

users have expensive payment with a job that doesn’t pay well and will start to slip

This usually results in unfair advantage to one of the parties and can open up fraudulent behavior if the party uses influence to increase earnings.

Steven Levitt and Stephen Dubner's world view that “incentives are the cornerstone of modern life” (Levitt, 12) is a view that I completely agree with. I also believe that, after reading, that this is the key idea to this book. Greed, love, and happiness, along with many others, can all be incentives. Levitt and Dubner show this by expressing that business, whether a street-gang or McDonalds, is like a tournament. They express that everyone “wants to succeed in an extremely competitive field in which, if you reach the top, you are paid a fortune”(Levitt, 102). You can see the tournament as a pyramid, where the bottom is fighting their way to the top. Levitt and Dubner use the example of a crack gang. At the bottom of the pyramid, the members each make $3.30 an hour, while risking not only prison, but their life. Whereas the leaders would be making up to 68 thousand dollars a month. The rules of the tournament are that you have to start at the bottom to make it to the top, you have to be willing, and you have to prove yourself to be above average (Levitt, 104). The incentive is clear: to win the tournament and make the most money. This example complements my world view, where incentives are the backbone of choices. Incentives can

Part one begins with the basic postulate of economics: incentives matter. The authors explain in easy to understand

Within the environment of the organization, society was very important to both businesses but in differing ways. Fletcher Jones’ dream was to build not only a factory but a workers cooperative where every employee would be a part owner of the company and as a result would benefit directly from it’s success. However, while Greg Brenneman (1998), the COO of Continental Airlines, refers to we as his 40,000 coworkers at Continental, they are, co-workers not co-owners.

Having buy-in from key stakeholders is crucial for the success of an incentive pay system. For example, if top management does not support such a program, lower-level managers will place little importance on effectively administering the program. Hence, a lack of top management support often leads to a lack of accountability. (Gordon, Kaswin)

The second scenario explained about the Tuna Canning Company that hired 21 seamen in Southern Florida to work abroad. They signed an agreement to get paid $200 each plus extra cents depending on what they catch. The seamen complained about the weak fishnets and wanted to get paid $400, which the company agreed. When they returned, the company just wanted to pay the original $200.

Given the effect a CEO can have on a company's success, we can understand why their compensation packages

Keeping employees motivated in addition to creating incentives and/or additional ways for employees to receive more compensation will create better performance overall within an organization. Contrary if company B gives their employees incentives to perform, without any motivational tactics they probably will not have as many top performances as company A, in addition the company may only seek short term rewards verses have long term success. Lack of motivation for employees within an organization, can cause long term damage for the company’s success. Different things motivate everyone; therefore there should be a system in place to keep employees motivated for the long term success of the company. In the MBM textbook under the concept of incentives, compensation, and motivation, there are a couple of different views of how it should be applied within an organization. We will discuss The Social Role of Profit, Personal Profit and Losses, and the way Market-Based Management view how incentives, compensation, and motivation should be applied and the things that effectively drive employees’ actions while at work.

Understanding how independent agents work together and cooperate to exceed every task they face is the major goal of multi agent systems (MAS). MAS is a group of autonomous entities which simultaneously occur at the same time, taking what they need from common resources, and communicating with each other in different ways (Cormas). In addition, multi agent systems are considered a distributed system because of how independently agents are communicated despite of their different owners and motivations (Cormas). Not necessarily the agents that in multi agent system be just software, but it could be humans or even human teams who work together. In fact, one of the fields that were encouraged multi agent systems is e-business and all its areas such as online auction, e-commerce, and tourism. Electronic commerce application consists of core module which is considered the basic part to meet all business requirements such as preferred language and communication media, sourcing module which makes the process easy for buyers and sellers as well by providing them all the information they need, negotiation module which handles both easy and difficult negotiation such as discussing with multiple agents at the same time with different languages, auction module which cares about creating a suitable environment to sell as many as it could of its goods, and finally software agents which is the responsible part to finishing a deal, sending requests, and doing

The principle-agent problem is a game-theoretic situation where; there is a player (the principal) and one more other players (the agents). This is the problem of how the principle can motivate the agent to act for the principles benefit rather than follow self interest. “The problem is how to devise incentives which lead to report truthfully to the principle on the facts they face and the actions they take, and act for the principles benefit. Incentives include rewards such as bonuses or promotion for success, and penalties such as demotion or dismissal for failure to act in the principles interest.” (Black, J. 2003). The actions however, may not