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13_Organizational_Architecture - ACCY560 July14,2011...

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Click to edit Master subtitle style Organizational Architecture ACCY 560 Information in Value Creation July 14, 2011
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Economic resources People possess rights to a variety of economic  resources (including their own labor) They may contract to have others make  specific decisions about those  economic resources The objective of such contracting is “gains  to trade”
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Organizations Organizations are a network of contracts to  exchange economic resources with gains-to- trade objectives Bilateral  contract Principal Agent
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Contracting networks University Professor Student Professor Student University
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Agency problems & costs Agents may take advantage of their private  knowledge to increase their own well-being at  the expense of the principals’ well-being Adverse  selection Moral  hazard Free  rider Time  horizons
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