Information mechanism

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The term information mechanism describes instruments in the principal-agent theory that a contractual partner (the so-called principal) can use to motivate the other contractual partner (the so-called agent) or to force them to disclose their own actions. This increased transparency enables the principal to check whether the agent is actually acting in accordance with the contract, which means that costs (so-called agency costs) and other problems in contractual relationships (so-called agency problems) can be minimized or avoided entirely. It is one of the incentive mechanisms available to the principal when drafting the contract.

Classification and delimitation from other incentive mechanisms

Classification of information mechanisms in modern institutional economics

The term comes from the agency theory of the principal-agent theory , which is a partial approach of modern institutional economics . In economic and social life there are numerous examples of the super-subordination relationships between agent and principal, such as employer and employee, examined in the framework of agency theory.

Probability of proper contract fulfillment depending on the information level of the principal

The agent can pursue his own interests to the detriment of the principal instead of fulfilling his duties according to his duties, because he has an information advantage over the principal . He is thus able to pass on incorrect information to the principal with regard to his own qualifications , his scope for decision-making and his actual performance behavior and thus deliberately deceive him. This risk increases in particular as the availability of information about the agent's options for action decreases.

Due to the limited rationality of the contractual partners and the limited ability of the agent to precisely and conclusively define future activities when the contract is concluded or to anticipate improper interpretations of the contract by the agent, the description of the execution and implementation inevitably remains imprecise and incomplete.

At this point, information mechanisms and other incentive systems need to be included.

Overview of the incentive systems in game theory

Incentive systems are all approaches / mechanisms that serve to fulfill the main tasks of drafting contracts. A distinction is essentially made between incentive, control and information mechanisms. What all three mechanisms have in common is that they aim to control the behavior of the agent. This should be "animated" to efficiently provide the contractually owed service and not to deceive the principal either before or after the conclusion of the contract.

A distinction is made between input and output-oriented control. While the incentive mechanisms are linked to the agent's results (output-oriented control), direct behavior control of the agent is intended by means of control mechanisms by linking the remuneration systems directly with the observable behavior of the agent. The information mechanisms - as a quasi-combination of incentive and control mechanisms - aim at both target values ​​(behavior + result).

The thrust of the incentive systems with regard to the likelihood of proper contract performance

Information mechanisms - similar to control mechanisms - aim to make the agent's behavior more transparent. While control mechanisms attempt to formulate the behavior required to achieve the goal as precisely as possible before actually fulfilling the contract, this is not explicitly specified when the information mechanisms are used in isolation .

Rather, the goal achievement analysis should be used to examine whether the actions selected by the agent were suitable for performing the principal's tasks. The results are used to infer the specific behavior.

In comparison to the other incentive systems, this results in the following effect on the probability of the performance owed in accordance with the contract.

Screening vs. Signaling

In order to be able to carry out such a control, it is necessary to reduce the information asymmetry, i. H. the principal must have a more extensive insight into the performance behavior and the action situation of the agent. This improvement in the principal's level of information requires improved information systems and an increased exchange of information.

A distinction is made between screening and signaling:

  • Screening is understood to mean increased information efforts by the principal, for example through increased monitoring of agent behavior.
  • Signaling provides the agent with incentives to make his information and actions more transparent to the principal. This allows him to increase his attractiveness and credibility in the eyes of the principal.

Methodical implementation

Possible instruments that act as information mechanisms are contract management, controlling and reporting.

target direction

Information mechanisms are intended to increase the agent's incentives to act in accordance with the interests of the principal. This incentive becomes greater, the higher the information level of the principal and the more aware the agent is of the effect of the information mechanisms. The more transparent the agent's situation becomes for the principal, the more difficult it will be for the agent to act opportunistically without being noticed (possibilities of deception are regulated). Consequently, the results / behavior that can be observed via information mechanisms are linked to the agent's remuneration and remuneration system.

Types of information

The improvement of the information situation can relate to several types of information:

  • Information about possible actions
  • Information about goals to be achieved
  • Information about occurring conditions and their probabilities
  • Information about the preferences and decisions of the other party

As a rule, several types of information are recorded using the methodological approaches listed above.

problem

As a rule, increasing the transparency of the agent's behavior due to his risk aversion will NOT be in his interest. Resistance to the inclusion of such mechanisms in the contract and regulations must therefore be expected even before and at the time the contract is concluded. Therefore, concessions (e.g. higher basic remuneration) and / or additional incentive and control mechanisms that cause additional agency costs are necessary.

Assessment of the information mechanisms for solving the principal-agent problems

Although the use of information mechanisms has been significantly simplified due to the increasing spread of electronic media and the increasing automation of business and goods traffic as well as the electronic processing of business correspondence, which has now become the standard, the ideal state of complete information status based on trusting and unrestricted cooperation is practically impossible to achieve. Due to the monitoring costs (especially for screening) or incentive payments (especially for signaling) that arise when using the information mechanisms, it is not possible to completely eliminate the agency costs , but the aim must be to minimize them through the most skilful contractual arrangements possible. To this end, the combined use of incentive, control and information mechanisms is recommended.

Individual evidence

  1. ↑ Archive link ( Memento of the original from June 13, 2007 in the Internet Archive ) Info: The archive link was inserted automatically and has not yet been checked. Please check the original and archive link according to the instructions and then remove this notice. P. 4 (December 6, 2008)  @1@ 2Template: Webachiv / IABot / www.wiso.uni-koeln.de
  2. ^ Rainer Elschen: Subject and possible applications of the agency theory. P. 1005.
  3. ^ Benedikt Langer, Jochen Siller: Institutional Incentive Factors in the German School System: Status Quo and Reform Options Using the Example of North Rhine-Westphalia. P. 4.
  4. ^ Heinrich Reinermann: New Political and Administrative Management. P. 92.
  5. ^ Wikipedia: Information system
  6. ↑ Alexander Runge: The role of electronic contracting in electronic commerce
  7. ↑ Alexander Runge: The role of electronic contracting in electronic commerce
  8. ↑ Alexander Niermann: Mobile Electronic Contracting. P. 11f.
  9. ^ Benedikt Langer, Jochen Siller: Institutional Incentive Factors in the German School System: Status Quo and Reform Options Using the Example of North Rhine-Westphalia. P. 4.

literature

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  • Alexander Niermann: Mobile Electronic Contracting ( available online ; last accessed December 6, 2008).
  • Benedikt Langer, Jochen Siller: Institutional Incentive Factors in the German School System. Status quo and reform options using the example of North Rhine-Westphalia ( available online (PDF; 121 kB); last accessed: December 6, 2008).
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  • Philip Wettengel: Patronage of political parties in the ministerial bureaucracy of the federal states ( available online ; last accessed: February 6, 2014).
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  • Frank Heinemann: The theory of global games. Private information as a means of avoiding multiple equilibria. In: Journal for Business Administration. 55, No. 3, 2005, pp. 209-241.
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  • Bernd Schopp, Katharina Stanoevska-Slabeva: Electronic Contracting in Electronic Markets. In: Rolf Weiber, (Ed.): Handbook Electronic Business: Information Technologies - Electronic Commerce - Business Processes . Gabler, Wiesbaden 2000, ISBN 3-409-11636-2 , pp. 753-777.
  • Rainer Elschen: Subject and possible applications of agency theory. In: Journal for Business Research. 43, No. 11, 1991, pp. 1002-1012.
  • Heinrich Reinermann: New Political and Administrative Management ( available online (PDF; 613 kB); last accessed: December 14, 2008).
  • Alexander Runge: The role of electronic contracting in electronic commerce . Deutscher Universitätsverlag, Wiesbaden 2000, ISBN 3-8244-7230-9 .

Web links