New research reveals key to solving agency problems and improving risk sharing
The article explores how information is used to motivate and share risks in business relationships. When the boss isn't worried about risks or can easily control outcomes, they focus on how much they know about what their employees are doing. But when outcomes are uncertain, bosses have to rely on incomplete information to keep employees motivated and share risks. The researchers found a way to rank different information systems based on how useful they are in these situations. They also identified conditions that support this ranking method.