Incentive Conflicts and Contracts

INTRODUCTION

 Individuals make decisions that increase their personal

gain between parties when contracting with a
corporation, which is known as incentive conflict
 The development of efficient solutions to agency issues
is in the best interests of all contract parties
 Research questions are:
 1. How does eBay produce profit?
 2. Are there any possible contracting concerns on
eBay?
 3.How much does it cost to contract with eBay?
 Method used for the case study is qualitative and data
it is collected from the secondary reseources.That
means data is collected from the internet.
Literature Review

• The theory that backup the incentive

conflicts and contracts. That is agency
theory.
• Agency theory is a management and
economic theory that attempts to explain
business relationships and self-interest. It
explains the relationship between
principals and agents, as well as control
delegation.
The role of contracts in
controlling incentive conflicts
Costless contracting
◦ ideal contracts would align interests
(minimize incentive conflicts) at no or low
cost
Costly contracting and asymmetric
information
◦ contracts costly to negotiate, write, administer
◦ parties to contract have asymmetric
information on performance levels
Conclusion
Individuals make decisions that increase their
personal gain between parties when contracting
with a corporation, which is known as incentive
conflict.Many relationships exist between a
company and its vendors, staff, shareholders, and
other stakeholders.
.As a consequence, it's understandable if disputes
occur between various parties. Incentive problems
with benefits result in costs that minimise value.
The case study method is a teaching method in
which a student is confronted with a specific
problem, or case