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Found 2 Skills
Apply contract theory to design incentive-compatible agreements under moral hazard and adverse selection. Use this skill when the user needs to structure principal-agent contracts, evaluate compensation schemes, or analyze incomplete contract problems where parties cannot specify all contingencies ex ante.
Apply Agency Theory (Jensen and Meckling, 1976) to diagnose principal-agent problems — moral hazard, adverse selection — and design governance mechanisms to align interests. Use this skill when the user needs to analyze conflicts of interest between owners and managers, design incentive or monitoring structures, evaluate corporate governance effectiveness, or when they ask 'how do we ensure managers act in shareholders interest', 'why is this incentive plan failing', or 'what governance mechanisms reduce agency costs'.