agent definitions — economics
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overview
economic treatments cast agents as decision-makers responding to incentives under information asymmetry. agency problems arise when agents’ preferences diverge from principals’, leading to contract design, monitoring, and governance mechanisms.
signature traits
- utility alignment: focus on aligning agent behavior with principal welfare via contracts and ownership structures.
- information asymmetry: moral hazard and adverse selection shape how much discretion agents receive.
- organizational design: agency theory informs corporate governance, compensation, and control systems.
illustrative definitions
- 1976 — jensen & meckling, “theory of the firm”: defines the agency relationship as delegating decision authority, with agency costs and ownership structures.
- later corporate governance literature: extends the framework to managerial incentives, boards, and investors.
- behavioral agency research: explores risk preferences, incentives, and social context influencing agents’ choices.
relation to other dimensions
- autonomy spectrum: agents possess moderate autonomy bounded by incentive contracts; deviations trigger monitoring or bonding costs.
- entity frames: embodies the institutional/hybrid frame—agents are individuals embedded in contractual structures.
- goal dynamics: primarily goal acceptance, with adaptation mediated through incentive schemes rather than negotiation.
- persistence & embodiment: assumes long-lived relationships (firms, managers) with sustained accountability.
open questions
- how do economic agency models adapt when the “agent” is an llm-powered system with probabilistic outputs?
- can incentive-compatible contracts be designed for machine agents, and who bears the residual risk?
- what new agency costs emerge when humans supervise autonomous software that can scale decisions rapidly?