Agency theory — OpenTuition Forums

SSaline13y ago

In bpp it is written that

"Agency theory proposes that, although individual members of business tema act in their own self interest, the well-being of each individual depends on the well-being of other team members and on the performance of the team in competition with other teams"

Can you please elaborate what does this mean.

Thanks a lot

John MoffatTutor13y ago#1

Let me give you an example.

I don't know where you work, but I guess that you want to do well yourself (and get paid more / get promoted etc.). That is your own self-interest.

However, you also need your company to stay in business and to be more profitable (so that they can afford to pay you more etc.) and for this you need the other people working round you to be working well also. This is the performance of the team.

Hope that helps.

SSaline13y ago#2

Thanks a lot :)

SSaline13y ago#3

What do we mean by "Transaction Cost Economics" theory ?

Can you please shed some light on it.

Thank you so much :)

John MoffatTutor13y ago#4

In very simple terms it is the idea that firms produce their own goods (instead of having them made by someone else) when the costs of doing it themselves is cheaper.
There is a much fuller explanation on Wikipedia - if you do a Google search you will find it.