1. Background: What is meant by “market?”
“..a social system in which individuals pursue their own welfare by exchanging things with others whenever trades are mutually beneficial.”
Trades make each better off, although trading is not a necessity for either.
Source: Deborah Stone, Policy Paradox

2. Superior- subordinate
Examples of exchanges* (transactions, contracts) applied to public organizations
citizens
Private vendor
Elected official
Superior- subordinate
Agency head
Environment
Between employees
*Many other exchanges possible: exchanges can be either formal or informal; concrete of implied

3. Markets: Perfect vs. Real
Small numbers (limited competition)
Information is scarce and costly..and is subject to interpretation
Transactions have broader social impacts
Unlimited #s of buyers and sellers
The availability and objectivity of information
Transactions affect only the parties involved

4. Agency Theory as the basis of Market Metaphor
Related Issues:
Goal incongruity
Information asymmetry
Cost of monitoring
Shirking
Moral hazard
Adverse selection
Incentive
Behavior-based vs. output based control
Contract* between principal and agent as the focus of the metaphor
Contract can be real or figurative (implied)

5. What kinds of questions does agency theory raise in analyzing organizations??