Reputation

Here, I am going to discuss my reputation as the captain of my travel baseball team and how I built the reputation that earned me that position. Upon making the team through a series of three days of try-outs, the coaches announced that they would be looking for three captains to serve as a closer tie between coach and team. These captains would also serve the purpose of running warm ups and other basic components of practice that didn’t require a coach at the ability level we were competing at. These captains needed to be well respected by the coaches as well as their teammates, and although I wasn’t the most athletic member of the team, I worked my way into this position. It began with coming to practice earlier than the mandatory time and staying later practicing small aspects of my swing and fielding. I initially did this just because I enjoyed the sport of baseball and practice acted as a nice get away from school and work. Quickly, my teammates and coaches noticed the extra work I was putting in and it influenced other members to stay longer. Not only was I the first one in and last one out but I also prided myself to keeping a high level of intensity while practicing. I was not one to take a rep off or have a lazy practice.

Although I don’t believe I ever “shirked” on my responsibilities in order to benefit myself, there were definitely moments where I wasn’t ecstatic to be a captain. Whenever the team had a poor performance the coaches came down on the captains much harder than they did the rest of the team. This additional accountability was stressful and sometimes felt unfair. In hindsight, it was definitely just a way for the coaches to make sure that they got their point across. Teammates generally listen more to each other so if the captains were sharing the views of the coach it made things a lot easier on the coaches. This did have an upside, however. When our team performed especially well it felt as if being captain entitled me to the victory.

In economics and organizations, I think shirking is a more prevalent topic. It seems that a lot of business is done just to maximize profits and not necessarily to stay true to moral codes or reputations. In business, giving up a reputation may earn you a hefty profit. For example, a company that has a great reputation for quality may decide to lower quality standards to save on production costs. If they can do this without substantially upsetting buyers, they can leave their reputation of quality for a higher revenue.

Principle-Agent Triangle

The standard principal-agent model discussed in class is bilateral for simplicity’s sake; in the real world the model functions more often as a triangle with one agent and two clients. The first example that comes to my mind is that of a stock broker. Here, the broker would be the agent, and the buyers/sellers of stocks and the firm the broker works for are both the principals. The agent’s job here is to match either a market order or a limit order from the buyer to that of the seller. A market order is the stereotypical way of stock buying. Buyers say how many shares of a stock they want to purchase and the broker finds a seller for that amount at whatever the current market price is. This can be risky for the buyer because the market can fluctuate before the broker is able to find the seller. A limit order is when the buyer sets a limit price and once the stock falls to that limit or below the broker can find a seller. This has a lower chance of being executed, but is safer for the buyer. The same problems can arise when selling a stock. The more trades the broker can facilitate, the more the firm reaps the benefits. Also, if the broker can create a trade between clients that use the same firm, the better off the firm is. For the broker, there is very little moral hazard, they make trades for the buyers/sellers when a match arises.

The case of a financial manager is very different. Just like a broker they are the agent of the principal firm and principal client. However, a financial manager has the power to invest and sell without the permission of the client. Here is where moral hazard becomes apparent, and the principals could not see eye to eye regarding the performance of the agent. The financial advisor could make a lot of trades, which would benefit the firm and hurt the investor, or the financial advisor could be very careful with trading and most likely benefit the investor and not the firm. The solution to resolving this tension relies heavily on the agent. The agent would have to work very diligently in finding a relatively diverse and high trade volume that provides good returns on investment. This way the neither principal is disappointed.


Also, if the company is in the market of a particular stock, then it is in the firm’s best interest to push that stock to its clients even if it does not better the client’s portfolio. In this case, the agent should find clients with portfolios that need that particulars stocks properties. Whether it be to further diversify or get into a new market, it should be to benefit that client.


The triangle principal agent case can be seen in any other type of broker such as that of one in real estate. More often than not, the agent has to accommodate two principals. Clearly, this can lead to conflict in which case the agent must diffuse the problem in a manner unbiased to either side.