| Abstract: | This paper extends standard agency theoretic models to explicitly take into account the presence of multiple criteria at the agent level. Two approaches for this extension are discussed. In the first approach we consider only the minimum information that the principal might posses about the agent’s preferences for different criteria. It can be shown that in this context the principal has limited possibilities to influence the agent’s behaviour. In the second approach a richer information set is considered. In this context it is possible to determine probabilities of alternatives being selected by the agent. We also analyse how these probabilities can be influenced by the principal and how this affects the principal’s net profit. © 1998 John Wiley & Sons, Ltd. |
