Disbalances in inefficient equilibrium states in “vertical” relationships of agents

SOKOLOVSKYI, DMYTRO (2025): Disbalances in inefficient equilibrium states in “vertical” relationships of agents.

Abstract

The problem of identification of efficient economic conditions, arising from the «vertical» agents’ relationship, is considered. It’s shown that the application of classical concepts of market failure to estimate the intracorporate relationships is inexpedient. The application of the principal-agent theory using the concept of disbalances is considered. A number of examples of the interaction between economic agents, the eventual failure of whose can be proved by disbalances given. The pattern of evolutionary transformation of relationship, characterized by coordinating or strategic disbalance, is described for Pareto inefficient conditions and norms.

• Item Type: MPRA Paper
• Language: English
• Keywords: efficiency; economic agents’ relationship; disbalances
• Subjects: C - Mathematical and Quantitative Methods > C0 - General > C02 - Mathematical Methods; C - Mathematical and Quantitative Methods > C6 - Mathematical Methods ; Programming Models ; Mathematical and Simulation Modeling > C62 - Existence and Stability Conditions of Equilibrium; H - Public Economics > H3 - Fiscal Policies and Behavior of Economic Agents > H30 - General

References

Stiglitz, J., 1987. Principal and Agent. The New Palgrave: A Dictionary of Economics; J. Eatwell, M. Milgate and P. Newman (eds.). London: Macmillan.

Stiglitz, J. E., 1999. Economics of the public sector. N. Y.–London, W.W. Norton & Company.

Furubotn, E. G. and Richter, R., 1997. Institutions and economic theory: The contribution of the new institutional economics. Ann Arbor, University of Michigan Press.

Williamson, O. E., 1985. The Economic Institutions of Capitalism”, N.-Y.: MacMillan.

Olson, M., 1971. The Logic of Collective Action: Public Goods and the Theory of Groups”, Harvard University Press.

Aumann, R., 1995. Backward induction and common knowledge of rationality. Games and economic behavior, 8, pp. 97-105.

Axelrod, R., and Hamilton, W. D., 1981. The Evolution of cooperation”, Science, 211, pp. 1390-1396.

Akerlof, G. A., 1970. The Market for “Lemons”: Quality Uncertainty and the Market Mechanism. Quarterly Journal of Economics. 84(3), pp. 488-500. doi:10.2307/1879431.